Shire succumbs to £31bn takeover offer from US rival AbbVie

The deal as it stands, £24.44 in cash and 0.896 Abbvie shares, would give Shire’s investors a 25% stake in the combined company

London-listed drugmaker Shire, best known for its Vyvanse treatment for attention deficit hyperactivity disorder, has been courted by AbbVie since early May when it 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 £63 billion bid for AstraZeneca.

The deal as it stands, £24.44 in cash and 0.896 Abbvie shares, would give Shire’s investors a 25% stake in the combined company. The shares rose 128.5p to 4998.5p.

“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,” said the company.

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 $4.2 billion deal for 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 top-selling rheumatoid arthritis drug Humira, which accounts for 60% of its sales but loses US patent protection in late 2016.

AbbVie, led by Richard Gonzalez, is looking to cut its US tax bill by moving its tax base to Britain, in a tactic known as inversion.

Mick Cooper, analyst at Edison Investment Research, said: “It is pleasing to see the two boards working well together and the proposed offer seems a fair price that represents good value for both companies’ shareholders.”

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

The company was founded in 1986, with early successes including a range of calcium products to treat osteoporosis, and listed in 1996.

Comment: Behaving like grown-ups

IF Pfizer’s Ian Read was ever tempted to have another tilt at AstraZeneca he could do worse than look at how Shire and AbbVie have conducted themselves over the past few weeks.

Shire is a US firm in all but tax-base and listing, and so hasn’t inspired the same political sound and fury that Astra did, but what also stands out is the grown-up way in which the two boards have gone about their business. Pfizer’s sally was marked by its aggressive public tubthumping and precious little effort to engage the board. AbbVie and its target kept the exchanges cordial but forthright, the big shareholders had their say and Shire was willing to sit down when the US firm’s offer came into the ballpark.

The result is nearly $14 a share extra for Shire’s shareholders and an offer at a 53% premium to the price before the first approach. All with a minimum of fuss. Chair Susan Kilsby has done a good job: she might even get a few offers herself.