AbbVie Inc. (ABBV:US) said its $46.5 billion bid for Shire Plc (SHP) offers “compelling” value to the drugmaker’s shareholders as the U.S. company begins campaigning in favor of the deal.
AbbVie will brief shareholders in a conference call at 8 a.m. Chicago time today on its rationale for the acquisition, the North Chicago, Illinois-based company said in a statement. Shire’s board unanimously rejected AbbVie’s offer, saying it undervalued the company.
“AbbVie is offering Shire shareholders compelling immediate value with significant future upside potential,” the U.S. company said in the statement.
Buying Shire would allow AbbVie to move its headquarters out of the U.S. and have a lower tax rate. The addition of Shire’s array of rare disease treatments and drugs for attention deficit hyperactivity disorder would also diversify AbbVie’s product line, which is dominated by a single medicine, the arthritis therapy Humira.
The acquisition would add “materially” to AbbVie’s earnings per share excluding some items in the first year after it’s completed, the company said. Buying Shire makes sense strategically because sales growth for both companies would accelerate, AbbVie said.
The combined company would be managed from Chicago, incorporated on the island of Jersey in the English Channel, and listed on the New York Stock Exchange. The tax domicile would be moved to the U.K. from Shire’s current location of Dublin, AbbVie said.
Tax Move
AbbVie also addressed Shire’s criticism that the plan to move out of the U.S. for tax purposes raised the risk of the deal. “AbbVie has thoroughly assessed the tax and structuring aspects of this transaction in detail and is confident regarding its ability to successfully execute the transaction,’ the U.S. company said. ‘‘AbbVie believes the proposed transaction is highly executable.’’
The tax rate for the combined company would drop to about 13 percent by 2016, AbbVie said. The U.S. company’s tax rate was about 22 percent last year. AbbVie also will be able to access money it now is keeping outside the U.S. to prevent it from being subject to U.S. taxes.
The cash-and-stock bid valued Shire at about 46.26 pounds a share as of May 29, just before AbbVie made the proposal, AbbVie said. Shire calculates the original value differently, putting it at about 46.11 pounds. Because AbbVie’s stock has declined, the bid is now worth about 45.64 pounds, AbbVie said today.
Shire Gains
Shire rose 2.1 percent to 44.95 pounds at 12:30 p.m. in London. A spokeswoman for the company said she couldn’t immediately comment on AbbVie’s statement.
To make a firm offer, AbbVie would want a unanimous recommendation from Shire’s board, the U.S. company said. Under U.K. takeover rules, AbbVie has until July 18 to make a firm offer or walk away. If it walks away, it’s precluded in most cases from making another bid for six months.
Flemming Ornskov, Shire’s chief executive officer since May last year, has argued to keep his company independent, projecting that product sales will double to $10 billion by 2020 as Shire expands in drugs for eye maladies and other rare diseases.
To contact the reporter on this story: Phil Serafino in Paris at pserafino@bloomberg.net
To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net; Reg Gale at rgale5@bloomberg.net Kristen Hallam
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