AbbVie Inc. Statement regarding a possible offer for Shire plc
25 June 2014
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE"). THERE CAN BE NO CERTAINTY THAT ANY FIRM OFFER WILL BE MADE
For immediate release June 25, 2014
Statement from AbbVie Inc. ("AbbVie") regarding a possible offer for Shire plc ("Shire")
The proposed combination is strategically compelling to AbbVie and Shire and would create a larger and more diversified biopharmaceutical company with multiple leading franchises and significant financial capacity for future acquisitions, investment and enhanced shareholder distributions and value creation
AbbVie is offering Shire shareholders compelling immediate value with significant future upside potential from ownership in New AbbVie that AbbVie expects will create long-term value for all shareholders
AbbVie is confident its global resources and highly experienced management team with its strong track record of shareholder value creation would create superior value from Shire's assets vs. Shire's standalone prospects
AbbVie expects the proposed transaction to be materially accretive to AbbVie's adjusted EPS(1) in the first year following completion, growing to above $1.00 per share by year 2020, with material ongoing financial and operating benefits
AbbVie believes this transaction is highly executable
Following its announcement on June 20, 2014, AbbVie is pleased to outline the compelling strategic rationale for, and background to, its proposal to the Board of Shire of GBP20.44 in cash and 0.7988 ordinary shares of New AbbVie for each Shire share (the "Proposal"). The Proposal represented an indicative value of GBP46.26(2) on May 29, 2014 (the latest practicable date before the Proposal was made). Whilst this cash and share mix is valued at GBP45.64(3) per share as of June 24, 2014
1 Adjusted EPS excludes intangible assets, amortization expense and purchase accounting adjustments and other specified items. The statement that the transaction is earnings accretive should not be construed as a profit forecast and is therefore not subject to the requirements of Rule 28 of the Code. It should not be interpreted to mean that the earnings per share in any future financial period will necessarily match or be greater than those for the relevant preceding financial period.
2 Based on AbbVie's closing share price of $54.03 (and an exchange rate of $1.00:GBP0.5982) on May 29, 2014, the latest practicable date before the Proposal was made, and assuming one New AbbVie share is issued for each existing AbbVie share in the simultaneous AbbVie holding company restructuring described in this announcement.
3 Based on AbbVie's closing share price of $53.59 (and an exchange rate of $1.00:GBP0.5887) on June 24, 2014, the latest practicable date before this announcement.
any firm offer made by AbbVie under Rule 2.7 of the Code will need to be equivalent to GBP46.26 per share (subject to the reservations set out later in this announcement).
Combination has compelling strategic rationale for all shareholders
-- Combination to accelerate growth of both companies through multiple catalysts - AbbVie believes a merger of AbbVie and Shire would potentially accelerate growth and profitability by leveraging AbbVie's capabilities and infrastructure to make Shire's pipeline and products more successful than its standalone prospects. AbbVie believes that this merger would result in incremental sustainable leadership positions within high value market segments of significant unmet need, including: immunology, rare diseases, neuroscience, metabolic diseases and liver disease (HCV), as well as multiple emerging oncology programs.
-- Strong complementary fit across existing platforms is better than standalone capabilities - AbbVie believes that Shire's platform has a strong complementary fit with AbbVie's existing specialty focus, including physician access relationships, regulatory and market access capabilities, and patient-centric focus. AbbVie's existing expertise and development capabilities across areas such as GI, neuroscience, rare oncology indications, combined with AbbVie's resources and scale, could develop global franchises from Shire's platform and utilize M&A to supplement organic growth.
-- Leverage AbbVie's substantial and well-established global infrastructure - AbbVie believes that Shire could achieve immediate broader geographic penetration and scale by leveraging AbbVie's existing, well-established global infrastructure across more than 170 countries, including our existing commercial, regulatory and medical affairs, and market access in key emerging markets. A combination would provide Shire with the desired scale and infrastructure along with:
o A diversified portfolio of leading marketed products;
o Stronger growth platforms with the potential for further development; and
o A complementary specialty focus combined with global pharma capabilities.
-- Broader and deeper pipeline of attractive development programs - By leveraging AbbVie's established R&D infrastructure and expertise, AbbVie believes the combination would enhance innovation and end-to-end R&D capabilities, generating:
o A best-in-class product development platform, with near-term new product launches in liver disease (HCV), neuroscience, immunology, oncology, rare diseases, ophthalmology, and renal; and
o Expertise and infrastructure, including regulatory, health economics and outcomes research, and market access to expand product indications to meet patient needs. AbbVie's track record of product optimization is evidenced by its growth of the Humira(R) franchise through increased penetration in existing indications, geographic expansion, and approvals for new indications.
-- Substantial combined financial capacity - The enhanced financial profile of New AbbVie would offer greater strategic and financial flexibility, enabling:
o The opportunity to maximize Shire's rare disease and neuroscience franchises including resources to fully globalize Shire's planned launches;
o The potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced return of capital policy; and
o A world-class business development group to drive continued portfolio expansion with access to cash and financial wherewithal not available on a standalone basis.
Proposal offers compelling and immediate value
-- Proposal based on thorough analysis of public information - Since the autumn of 2013 AbbVie has conducted significant analysis of Shire's business, commercial products and R&D pipeline as well as valuation work, including a review of publicly available information and analyst estimates, to establish the compelling value offered in its proposals. Our model does not reflect the same magnitude of pipeline or GI franchise potential that have been communicated by Shire management.
-- Shire's recent share price appreciation already incorporates meaningful takeover premium - While AbbVie appreciates and values the potential of Shire's pipeline, AbbVie believes that the recent appreciation in Shire's share price already incorporates a meaningful premium resulting from M&A market speculation and AbbVie believes its Proposal is reflective of this appreciation. Furthermore, AbbVie notes that as of June 19, 2014, the mean price target for Shire published by equity research analysts was GBP37.50(4) per share.
-- Proposal offers compelling value - The indicative value of GBP46.26(5) represented a compelling premium of 33 percent to Shire's closing share price of GBP34.67(6) on May 2, 2014 (the last trading date prior to our initial proposal) and 58 percent to Shire's closing share price of GBP29.25 on April 17, 2014 (the last trading day prior to the emergence of
4 Sourced from Bloomberg and respective equity research reports. Mean price target for Shire ordinary shares published by equity research analysts between May 1, 2014 and June 19, 2014, prior to the commencement of the offer period; calculated based on the following, being all the equity research analysts who published target prices on Shire during that period, other than J.P. Morgan due to their role as financial adviser to AbbVie: Buckingham Research Group (June 18, 2014; GBP43.00); Susquehanna Financial Group (June 17, 2014; GBP43.00); CRT Capital Group (June 16, 2014; GBP38.11); Berenberg (June 13, 2014; GBP34.00); Deutsche Bank (June 9, 2014; GBP43.50); Goldman Sachs (June 4, 2014; GBP39.00); UBS (June 2, 2014; GBP34.50); Jefferies (June 2, 2014; GBP40.45); Leerink Partners LLC (June 2, 2014; GBP38.11); Credit Suisse (June 2, 2014; GBP34.00); BofA Merrill Lynch (May 30, 2014; GBP38.59); FBR Capital Markets (May 27, 2014; GBP33.42); Cowen and Company (May 23, 2014; GBP42.02); Piper Jaffray (May 18, 2014; GBP39.48); Societe Generale (May 13, 2014; GBP40.10); Citi (May 13, 2014; GBP41.00); Exane BNP Paribas (May 6, 2014; GBP36.00); William Blair & Co (May 5, 2014; GBP33.23); Bryan Garnier (May 2, 2014; GBP31.00); Cenkos Securities Ltd (May 2, 2014; GBP40.05); Panmure Gordon & Co Limited (May 2, 2014; GBP38.00); Sanford C. Bernstein & Co (May 1, 2014; GBP31.00); RBC Capital Markets (May 1, 2014; GBP35.77); SunTrust Robinson Humphrey (May 1, 2014; GBP36.35); and Morgan Stanley (May 1, 2014; GBP33.70). The median target price was GBP38.11, with a high of GBP43.50 and a low of GBP31.00. Analysis includes target prices for the Shire ADR and have been converted to GBP using an exchange