AbbVie Wins Shire Prize for Nearly $55 Billion
In its fifth attempt to buy the company, AbbVie, a recent spin-off of US drugmaker Abbott Laboratories, has won the race to acquire European rival Shire, clinching the deal for around $54.8 billion.
In terms of superlatives, it is the biggest pharmaceutical takeover so far this year and the sixth largest ever.
The cash-and-stock offer values Shire at £53.19 per share (about $91.06), a premium of more than 50% against the price in May before AbbVie's initial approach was first evident.
After the deal closes. Shire shareholders are expected to own about 25% of the combined company.
Combining the two drugmakers would create one of the world's 50 largest players, with nearly $25 billion in annual sales, around 30,000 employees and a market value of more than $137 billion.
Under the process known as inversion, the acquisition will allow AbbVie, based near Chicago, to reincorporate in the UK, thus reducing its overall tax bill. It will also increase financial flexibility, CEO Richard A. Gonzalez, told analysts in a conference call.
AbbVie's effective tax rate is thus expected to sink to 13 % by 2016 from 22.6% in 2013 and result in savings of millions of dollars annually.
The largest inversion ever, the deal would see the company reincorporated in Jersey, where Shire is incorporated. The company, however, would still be run from Chicago and listed on the New York Stock Exchange.
The merged company would have pro forma revenues of $24.9 billion in 2014, exceeding AbbVie's standalone forecast of $19 billion, according to healthcare analyst GlobalData. The analysts also forecast a 6% compound annual growth rate for the new company between 2014 and 2019, thus generating total revenue of $33.4 billion per year by 2019.
Apart from the tax aspect, the fact that Shire's arthritis treatment Humira, said to be the world's best-selling drug, loses patent protection in 2016, is sufficient AbbVie to seek new sources of revenue, market observers said.
Adding Shire's portfolio, which includes the attention deficit disorder drug Adderall, will allow AbbVie to widen its product offerings.
Following the news of the Abbott spin-off's successful bid, US Treasury Secretary Jacob J. Lew sent letters to senior members of Congress, encouraging them to pass legislation halting inversions, the New York times reported. The proposal would be retroactive, potentially thwarting AbbVie's ability to reincorporate in the UK.
