AbbVie, Shire Outline Positions in AbbVie’s Takeover Proposal of Shire

AbbVie issued a statement on June 20, 2014, to confirm that it had made an indicative approach to Shire PLC with a merger proposal that was rejected by Shire’s board of directors. AbbVie’s initial cash and share proposal in early May represented an indicative offer of £39.50 ($67.08) for each Shire share. AbbVie’ said its third and latest cash and share proposal when made represented an indicative offer of £46.26 ($78.57) for each Shire share. AbbVie also raised its 2014 earnings guidance on June 23, 2014 by 6 cents a share, saying it now expects earnings per share to be between $3.06 and $3.16 on an adjusted basis—excluding any revenue from a new hepatitis C drug, which is currently under priority and accelerated review in the US and European Union.  

In accordance with UK’s takeover rules, AbbVie must by July 18, 2014, either announce a firm intention to make an offer for Shire or announce that it does not intend to make an offer. Under UK rules, AbbVie reserves the right to make an offer at any time for less than £46.26 for each Shire share under certain conditions: with the agreement or recommendation of the Shire board, if a third party announces a firm intention to make an offer for Shire at a lower price than Shire’s offer of £46.26, or following the announcement by Shire of a whitewash transaction pursuant to the UK takeover rules.

Meanwhile, in rejecting AbbVie’s bid, Shire issued a statement on June 23, 2014, to highlight the company’s growth prospects. Shire said it expects to deliver double-digit compound annual product sales growth from its current portfolio and to more than double its 2013 annual product sales to $10 billion by 2020, comprising $7 billion from in-line product sales and $3 billion in sales from existing pipeline products. In the medium term Shire is also targeting annual product sales of $6.5 billion by 2016.The company points to its strength in rare diseases, neuroscience, and gastrointestinal product areas as well as citing other promising new therapeutic areas such as ophthalmology.

Shire reported on June 20, 2014,  that it  rejected an unsolicited and conditional proposal by AbbVie to acquire Shire in a cash and stock offer valued at approximately $46 billion. Shire issued a statement on June 20, 2014 to confirm that AbbVie had make the proposal on May 30, 2014. TShire said the  proposal comprised £20.44 ($34.78) in cash and 0.7988 AbbVie shares per Shire share and involved a new US listed holding company with a UK tax domicile. Based on AbbVie's 30-day volume weighted average share price of $54.10, the proposal represented a value of £46.11 ($78.46) per Shire share (comprising 44% cash and 56% AbbVie shares). Shire said that the proposal followed two earlier proposals by AbbVie that Shire had rejected. At AbbVie's request, Shire said it met with AbbVie to enable AbbVie to explain key aspects of its most recent proposal. Following this meeting, the board of Shire decided unanimously to reject the proposal on the basis that it fundamentally undervalued the company and its prospects. Shire also said that its board also had concerns regarding the execution risks associated with the proposed inversion structure as AbbVie would redomicile in the UK for tax purposes.

Susan Kilsby, chairman of Shire, said in a statement on June 20, 2014. “Shire has a long track record of delivering for shareholders and addressing unmet patient needs. Our high-performing management team and focused strategy are producing even stronger results, reflected in our recent top-line growth and increased profitability. With an expanded portfolio focused on high-growth opportunities, an efficient cost base and an enhanced innovative pipeline, we have put in place a platform for long-term value creation.  We believe that Shire has a strong independent future. The board believes the proposal fundamentally undervalued Shire and its prospects and that as an independent company Shire's focused growth strategy will continue to deliver significant shareholder value and patient benefits.”

Shire said that from 2008 to 2013, Shire's product sales increased at a compound annual rate of 11.6% and that the company achieved 19% growth in product sales from the first quarter of 2013 to the first quarter of 2014. The company’s rare diseases business unit recorded product sales of $2 billion, making it Shire’s largest business unit. As part of a growth strategy, Shire acquired ViroPharma, a rare-disease specialty biopharmaceutical company earlier this year, divested Dermagraft (a living skin substitute indicated for use in the treatment of full-thickness diabetic foot ulcers) to Organogenesis Inc., and terminated the Vyvanse major depressive disorder program.

Shire advised its shareholders on June 20, 2014, to take no action in relation to the proposal.

 Source: AbbVie and Shire



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