drugmaker Shire succumbed to an increased £31bn takeover offer from Abbvie yesterday, signalling the conclusion to a long-running courtship largely motivated by tax.
Shire said it was ready to recommend the deal, the latest in a list of mergers proposed by US firms seeking to cut their tax rates, and which comes less than seven weeks after the collapse of Pfizer’s $118bn bid for AstraZeneca, also motivated in part by tax factors.
Chicago-based AbbVie, which wants to buy London-listed Shire to cut its tax bill and diversify its product line-up, increased its offer to £53.20 per share on Sunday, following a request from the Dublin-based group which had rejected four previous bids. Reuters had reported on Saturday that Shire, a maker of drugs for rare diseases, had asked AbbVie to sweeten its offer to near £53 per share in order for it to recommend the deal.
Shire said the new bid comprised £24.44 in cash and 0.8960 new AbbVie shares for each Shire share and would result in Shire investors owning around 25 percent of the combined entity.
“The proposed offer seems a fair price that represents good value for both companies’ shareholders,” said Mick Cooper, an analyst at Edison Investment Research. Shares in Shire, founded in 1986, hit a record high of £50.45 in trading yesterday.
AbbVie is eager to buy Shire both to reduce its US tax bill by moving its tax base to Britain – a tactic known as inversion – and to diversify its drug portfolio.
The US group gets nearly 60 per cent of its revenue from rheumatoid arthritis drug Humira, the world’s top-selling medicine, which loses US patent protection in late 2016.
Analysts at Barclays estimated the move would provide an estimated $1.3bn (£0.76bn) tax savings by 2020, reflecting lower UK corporate tax rates.
AbbVie has proposed creating a new US-listed holding company with a tax domicile in Britain, whose corporate tax rate is set to drop as low as 20 per cent from 2015, well below the US headline rate of 35 per cent plus local taxes.