Spun off from Abbott Laboratories ($ABT) early last year, AbbVie ($ABBV) right now is somewhat of a one-trick pony, with lead drug Humira--the best-selling med in the world--raking in 57% of its 2013 sales. Though it has some hot prospects in its pipeline, it could use some other revenue sources, and it apparently thinks Shire ($SHPG) might be able to help it out in that department--and bring along some tax advantages, too.
Late Thursday, the Illinois-based drugmaker announced it has already put up three bids for the Irish company, with the most recent--an offer totaling about $46.5 billion--dismissed by the Shire's board as undervaluing the company. And while AbbVie says talks are no longer ongoing, that doesn't mean a deal is out of the question.
Under British takeover law, AbbVie still has until July 18 to announce a firm intention to make another play for Shire; it also laid out conditions under which it could renew its bidding.
"AbbVie reserves the right to introduce other forms of consideration and/or vary the mix of consideration," it said in a statement.
For AbbVie, a Shire acquisition would bring it a flagship collection of ADHD meds, as well as growing portfolios in rare-disease drugs and specialty products. But perhaps more attractive to AbbVie could be the lowered tax rate that comes along with Shire's Irish address. Shire shipped across the ocean to take advantage of a tax inversion back in 2008, and with a successful pickup, AbbVie could do the same.
"We see limited product portfolio synergies, hence assume cost savings, tax benefits, diversification, and Shire's attractive growth to be the M&A drivers," Jefferies analysts told Reuters.
Shire, though, has its reservations about such a move, noting that its board "had concerns regarding the execution risks associated with the proposed inversion structure."Susan Kilsby--Courtesy of Shire
And that was just one of many factors Shire Chairman Susan Kilsby said led the company to reject AbbVie's latest proposal. "With an expanded portfolio focused on high-growth opportunities, an efficient cost base and an enhanced innovative pipeline, we have put in place a platform for long-term value creation. We believe that Shire has a strong independent future," she said.
Shire may have to fight off more unsolicited advances if it wants to keep flying solo, however. As Cenkos Securities analyst Navid Malik told Bloomberg, AbbVie's offers could spur other bids; he listed Bristol-Myers Squibb ($BMY), Merck ($MRK) and Pfizer ($PFE)--which has already made one attempt at completing its own tax inversion with a so-far failed play for AstraZeneca ($AZN)--as potential suitors.
And then there's Allergan ($AGN), which, desperate to dodge Valeant's ($VRX) hostile buyout approach, could make a move for Shire imminently, analysts have said.
But Shire has already begun assembling its defenses, earlier this week bringing on Citi as an advisor to help it ward off any hostile companies that may come calling. Some analysts have suggested making its own pickups may help toward that end, too.
"If they want to stay independent, then going on a bit of a shopping spree makes it harder for another entity to go after them," Piper Jaffray analyst David Amsellem told Bloomberg earlier this month.
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