UPDATE 1-Shire hits record high as drugmaker braces for takeover bids

Tue Jun 17, 2014 7:51am EDT

* Shire expecting to receive approaches, taps Citi -sources

* Stock up as much as 4 percent at all-time high

* Going shopping itself may be way to stay independent (Adds more on share price rise, analyst comments)

By Ben Hirschler

LONDON, June 17 (Reuters) - Shares in Shire hit a record high on Tuesday on expectations of a takeover as dealmaking sweeps the drugs sector, after Reuters reported the group had hired investment bank Citi as a defence adviser.

Potential acquirers are eyeing the drugmaker's tax base in Ireland, where effective corporate tax rates are among the lowest in the world, as well as its fast-growing portfolio of drugs to treat hyperactivity and rare diseases.

Sources familiar with the matter said the London-listed company was expecting to receive takeover approaches following a wave of deals in the healthcare sector focused on achieving lower tax bills. Shire and Citi declined to comment.

Shire is a relative rarity in being a mid-sized drugmaker with no controlling shareholder, making it a perennial subject of takeover talk. Speculation of a bid has grown since April, when Pfizer's interest in acquiring AstraZeneca fired up the wider industry.

Sector bankers think it could appeal to U.S. pharmaceutical and biotech firms such as Bristol-Myers Squibb, Amgen , Abbvie, Gilead and Biogen Idec .

Shire itself has been a serial acquirer, buying rare disease specialist Viropharma for $4.2 billion last November in its biggest deal yet.

One option for the company to try and stay independent would be to step up the pace of its own dealmaking. Industry analysts at Citi said in a note that Shire could make debt-funded acquisitions totalling some $13 billion.

There has recently been speculation that Shire might be interested in NPS Pharmaceuticals, although NPS said on June 2 it had not held talks with Shire. NPS shares fell back on Monday as expectations of bidding for Shire increased.

NEW MANAGEMENT

Shire has delivered strong returns for its shareholders over the years, reflecting the success of its strategy of focusing on specialised disease areas.

The shares, which were trading below 30 pounds in early April, hit an all-time high of 36.78 on Tuesday, before slipping back to stand 2.8 percent higher at 36.35 by 1135 GMT.

Savvas Neophytou, an analyst at Panmure Gordon, said investors would probably view a takeout price of 40 to 45 pounds as reasonable for the company. "The price of 36 pounds already includes a fair bit of bid speculation," he said.

Citi, meanwhile, said its valuation range for the company was between 37 and 57 pounds a share.

One potential issue for any bidder is the fact that Shire's current management team is relatively new, with Chief Executive Flemming Ornskov in the post for only 13 months and Chairman Susan Kilsby - a former M&A banker - appointed on April 29.

Bankers said Ornskov would want to stay on as CEO after any deal, which could be a hurdle to acquirers.

Around 40 percent of Shire's sales come from attention deficit hyperactivity disorder (ADHD) medicines, while the firm also sells pricey drugs to treat rare genetic disorders and is building up a portfolio of treatments in ophthalmology and other speciality disease areas.

The race to strike so-called "inversion" deals offering lower tax rates was underscored at the weekend when U.S. medical device maker Medtronic agreed to buy Covidien for $42.9 billion and move its base to Ireland.

Ireland is a particularly attractive destination for such transactions since it has a 12.5 percent corporate tax rate, compared with 35 percent in the United States. (Editing by Jason Neely, Greg Mahlich)

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