US suitor wins Shire, and a British tax rate, in fifth takeover approach

The deal as it stands – £24.44 in cash and 0.896 AbbVie shares – would give Shire’s investors a 25 per cent stake in the combined company

Shire finally succumbed to US suitor AbbVie at the fifth time of asking yesterday as the drug group’s board said it was ready to recommend an improved $53bn (£31bn) takeover.

The FTSE 100 big-pharma player, best-known for its Vyvanse blockbuster treatment for attention deficit hyperactivity disorder, has been in the sights of AbbVie since early May when the US firm tabled its first bid proposal.

The two boards are now locked in “detailed discussions” in New York following the improved £53.20-a-share proposal, but AbbVie looks to have succeeded where US rival Pfizer failed in its much bigger £63bn bid for AstraZeneca. The deal as it stands – £24.44 in cash and 0.896 AbbVie shares – would give Shire’s investors a 25 per cent stake in the combined company. The shares rose 33p to 4,903p.

The company said: “The board of Shire has indicated to AbbVie that it would be willing to recommend an offer at the level of the revised proposal to Shire shareholders. Accordingly, the board is in detailed discussions with AbbVie in relation to these terms.”

The pursuit of Shire has stoked far less controversy than AstraZeneca because – apart from offices in Basingstoke – it is headquartered in Dublin but managed from Boston. The vast majority of Shire’s staff and sales are in the US.

AbbVie covets Shire’s rare diseases unit, bolstered by the $4.2bn deal for the US company ViroPharma last year, which the company is building up in response to more generic competitors to its ADHD drugs. It also wants Shire’s portfolio to reduce its reliance on its top-selling rheumatoid arthritis drug Humira, which accounts for 60 per cent of its sales but loses US patent protection in late 2016.

AbbVie is also looking to cut its US tax bill by moving its tax base to Britain, in a tactic known as inversion. Mick Cooper, an analyst at Edison Investment Research, said: “The proposed offer seems a fair price that represents good value for both companies’ shareholders.”

Shire previously fought to maintain its independence as its chairman Susan Kilsby unveiled a new target to double annual product sales, which account for the bulk of revenues, to $10bn by 2020.

The company was founded in 1986, with early successes including a range of calcium products to treat osteoporosis, and listed in 1996. The US firm was formed last year when Abbott Laboratories split into two companies, a medical products business which retained the Abbott name and a pharmaceuticals firm which became AbbVie.

Hooked: the string of deals

AbbVie’s £31bn takeover of Shire is the latest in a string  of huge deals – both successful and unsuccessful – in the sector this year:

April: Britain’s top drug maker, GlaxoSmithKline, reshuffles its drug cabinet with a three-part, multi-billion dollar asset swap with Swiss rival Novartis. It sells cancer drugs for Brentford-based Glaxo for up to $16bn, buying the Swiss giant’s vaccines operation for $5.25bn while the consumer health divisions of both are merged.

April-May: US firm Pfizer launches a takeover attempt for AstraZeneca – eventually raising its proposal to a potential $118bn or £55 a share – but the offer isn’t enough to bring Astra’s board to the table. Bad-tempered negotiations are conducted against a backdrop of political concerns over the impact of a deal on the UK’s research and development capacity.

April-July: Botox maker Allergan is still fending off a $53bn hostile approach from Canadian drug company Valeant and activist investor William Ackman.