Shire Rejects AbbVie’s $46-Billion Acquisition BidBy
Shire plc reports that it has 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. The proposal comprised Â£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 represents a value of Â£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 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.
Shire further outlined several reasons for its rejection of AbbVie’s proposal. It said that the proposal fundamentally undervalued Shire and its prospects as a leader in rare diseases and specialty markets. It also said that Shire’s new management has achieved a step-change in Shire's performance, resulting in accelerated growth and increased shareholder returns over the last 12 months, and that the company expects to more than double its 2013 annual product sales to $10 billion by 2020. Shire concluded that AbbVie’s proposal would deny Shire shareholders the full benefits of Shire's growth strategy
Susan Kilsby, chairman of Shire, said in a statement: “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 to take no action in relation to the proposal.