AbbVie Boosts Offer for UK-Based Shire Pharma

AbbVie Inc. (ABBV) continues to pursue Shire (SHPG) and has now come up with a fourth proposal. In its latest proposal, AbbVie has increased the bid to approximately £51.151 per Shire share (£22.44 in cash and 0.8568 ordinary shares of the merged company for each Shire share). We note that Shire has not rejected the offer outright. Instead, the company announced that its board will meet to consider the proposal.

The new proposal represents an approximate 11% increase over the preceding bid, which comprised £20.44 in cash and 0.7988 AbbVie shares per Shire share held, representing a value of £46.11 per share of Shire. Shire had promptly rejected the third acquisition proposal from AbbVie.

Both AbbVie and Shire shares fell 2.98% and 1.92% on the news.

What’s in the New Proposal?

AbbVie believes that the latest proposal will bring long-term value for all shareholders. Shire shareholders holding approximately 24% ownership in the post-merger entity will enjoy more of the synergies and value creation from the merger.

AbbVie expects the proposed combination to be accretive to earnings and enable a competitive tax structure. AbbVie intends to form a new listed holding company in the U.S. post acquisition with a UK tax domicile.

We remind investors that earlier this year, Pfizer Inc. (PFE) was actively pursuing AstraZeneca (AZN) primarily motivated by potential tax benefits. However, the Pfizer-AstraZeneca deal did not go through.

We believe that investor focus will remain on further updates from Shire regarding the AbbVie bid.

AbbVie and Shire currently carry a Zacks Rank #3 (Hold). AstraZeneca is a better-ranked stock in the health care sector holding a Zacks Rank #2 (Buy).