AbbVie Inc (ABBV) Seals Deal With Shire (SHPG), What Next?

AbbVie Inc (NYSE:ABBV) finally bought Dublin-based Shire PLC (ADR) (NASDAQ:SHPG) for 32 billion pounds or $54.7 billion after several unsuccessful bids. The deal was imminent, and experts started weighing in on the matter even before the official declaration of the agreement. On CNBC, Surani Fernando, assistant editor at Biopharm Insight, discussed the takeover ahead of the announcement, providing insight on what should be expected.

AbbVie Inc (NYSE:ABBV)

First, Fernando said the offer for Shire PLC (ADR) (NASDAQ:SHPG) was decent, and everyone now expects meaningful engagement. She said that the deal looks more like a diversification effort on the side of AbbVie even as it appears as to be a tax issue.

“If you look at the pipeline there is really no synergy there and the only rational here from a science perspective is diversification,” she remarked.

AbbVie Inc (NYSE:ABBV) appears to be seeking to cut its reliance on Humira, a top selling arthritis drug whose U.S. patent is set to expire in 2016. The company generates almost 60 percent of its revenue from the sale of Humira.  She also noted that the fact that AbbVie Inc (NYSE:ABBV) is prepared to pay a premium for Shire suggests that there is more to the deal, which is obviously tax reduction.

AbbVie Inc (NYSE:ABBV)’s accepted offer for Shire represents about 53% premium over the closing price of Shire on May 2, the closing day before the first offer was made. Shire reportedly rejected four earlier bids from AbbVie and until the offer was sweetened.

The cash-and-stock deal will see AbbVie Inc (NYSE:ABBV) pay 24.44 pounds per share in cash and issue 8.8960 new shares to Shire’s shareholders. “The consensus now is that this offer is quite fair when you see a jump from the initial offer,” Fernando said, commenting on the offer price and the series of bids that preceded the deal.

The deal with Shire is viewed as an opportunity for AbbVie Inc (NYSE:ABBV) to shift its corporate tax base away from the U.S., so as to take advantage of the tax havens of Europe.

Disclosure: none

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