The deal was hatched on a laptop computer when the companies' bosses met for dinner in May.
Although the London market initially reacted favourably to news of the deal with Roberts Pharmaceutical Corp, US investors took fright. Some analysts blamed concerns over Roberts stature relative to Shire. Others said US holders of Shire shares were selling because they thought the deal would leave them holding a depository receipt, a less attractive investment than a fully-listed share. Shire shares ended down 53.5p at 511.5p.
The deal comes after Shire employed bankers Bear Stearns to draw up a shortlist of merger candidates to help it add half a billion pounds to sales. The company was anxious to extend its drugs pipeline, anticipating that sales of its lead product, Adderall, an anti-hyperactivity drug, would decline.
According to sources close to the deal, the advisers booked dinner for Roberts' chief executive, John Sptiznagel and Shire's chief executive Rolf Stahel. Mr Stahel then produced a lap-top computer at the table and said: "This is how I see this working".
Mr Stahel is to become the chief executive of the group, which is to be called Shire Pharmaceuticals. Mr Sptiznagel will become a non-executive.
Mr Stahel hopes the company will be a more attractive marketing partner for smaller biotechnology groups than the major pharmaceuticals players because it would share their dependence on the success of a comparatively small number of drugs.
Sources close to the companies said the deal left Shire's UK rival, Medeva, looking increasingly vulnerable to a bid.
The deal would leave the enlarged group debt-free and still with no European presence. One source said: "Medeva would be the obvious fit."
Roberts will add cardiovascular treatments to Shire's existing portfolio of central nervous system drugs. The deal is expected to be completed in November.Reuse content