A second US drugs company has followed Pfizer in trying to buy a FTSE 100 giant in the hope of moving its tax base to Britain. AbbVie, until recently a division of Abbot Laboratories, has offered £27bn to buy Shire Pharmaceuticals, famed for its medicines for attention deficit disorder and rare diseases.
Shire moved to Ireland in 2008 to save tax but, just like Pfizer with AstraZeneca, AbbVie wants to merge its operations and move the domicile to the UK so it can benefit from Britain’s new-found tax- haven status.
The tax trick would not work if the combined group remained in Ireland, because US laws mean companies can only carry out such “inversion” deals with their tax domicile if at least a fifth of their shareholders are based in the new country.
UK corporate taxes are lower than in most developed economies, while patented products such as medicines carry further tax breaks.
Shire said it had rejected offers from AbbVie on 5 May, 13 May and 30 May, claiming they “fundamentally” undervalued its prospects. For the first time, it declared it would double sales to $10m (£6m) by 2020.
Shire says its fortunes have been transformed by its move into rare diseases, where sales of its medicines are running 39 per cent above last year.
AbbVie’s offer was priced at £46.11 per Shire share in cash and paper. Although based in Ireland now, Shire’s shares still trade on the London Stock Exchange.
While the takeover appears to have the hallmarks of the AstraZeneca takeover tussle, it does not have the same political ramifications.
Unlike AstraZeneca, Shire has no significant research and development presence in the UK, only employing about 400 staff in its Basingstoke head office. Its R&D scientists, who number about 1,700, are mostly in Massachusetts.
Nevertheless, AbbVie has hired the same political and media advisers as Pfizer used on its own bid – Sir Alan Parker’s Brunswick. Again like Pfizer, its panel of advisers include JPMorgan. Shire is using the banks Citi, Evercore and Morgan Stanley for its defence.
AbbVie’s blockbuster medicine is a treatment for rheumatoid arthritis called Humira, which is by some counts the biggest-selling medicine in the world. But this will begin losing its patent protection in the US and Europe in the next few years, and analysts said yesterday that Shire would provide AbbVie with the diversification it needs.
Shire’s share price leapt 17 per cent to 4,371p yesterday, and those close to the US company said it was considering a higher offer, possibly as early as next week.
At the latest price, the personal stake of Shire’s chief executive, Flemming Ornskov, would be worth £1m and his options would have a value of just under £2m.