* Shire rejects AbbVie offer valued at 46.26 pounds a share
* Investor, analysts say a deal might be done at over 50
* Shire says to double product sales by 2020
* Share price up 15 percent
(Adds further background, reaction)
By Kate Holton and Chris Vellacott
LONDON, June 20 British drugmaker Shire
has rejected a 27 billion-pound ($46 billion) takeover offer
from AbbVie, the latest attempt by a U.S. healthcare
firm to tap into lower tax rates abroad via an acquisition.
Shire, which has no single controlling shareholder, has been
seen as a prime takeover target for U.S. drugmakers due to its
attractive rare diseases business and its Irish tax base.
Saying its annual product sales are set to more than double
by 2020 to $10 billion, Shire rejected the 46.26 pounds per
share offer as failing to reflect its true value, despite the
offer being at a 30 percent premium to its share price over the
But analysts and one large shareholder said the firm may
struggle to resist a bid of over 50 pounds per share.
"You can easily see other people coming for Shire now
because it's in a good space," one of Shire's 40 biggest
shareholders told Reuters.
"Their pipeline is fantastic, it's growing at 20 percent so
for them (Abbvie) to offer 46 quid for that sort of growth
profile we think is not enough. If they came back with 50-plus
people would find it difficult (to say no) and that would be
Founded in 1986 in Britain, Shire conducts most of its
business in the United States and has been domiciled in Ireland
for tax purposes since 2008.
AbbVie's takeover offer proposed creating a new U.S.-listed
holding company with a tax domicile in Britain, where the
government has also introduced tax breaks designed to encourage
research and development.
The approach marks the latest in a long line of mergers
proposed by U.S. firms seeking to lower their tax rates, and
comes less than a month after the collapse of Pfizer's
$118 billion bid for AstraZeneca which was also
motivated in part by tax considerations.
Ireland's corporation tax rate currently sits at 12.5
percent, one of the lowest in the world, while Britain has been
cutting its rate from 28 percent in 2010 to 21 percent this year
and 20 percent from 2015, well below the U.S. headline rate of
35 percent plus local taxes.
Tax advisers say the British system also enables
international companies to lower their tax rates in other ways.
Shire said the offer from AbbVie not only undervalued the
company's prospects but "the board also had concerns regarding
the execution risks associated with the proposed (tax) inversion
structure, as AbbVie would redomicile in the UK for tax
HIGHER PRICE NEEDED
AbbVie was first to release a statement confirming that its
offer had been rejected, after Reuters revealed the talks late
Confirmation of the offer could kick off a bidding war for
Shire, with sector bankers expecting the group to also prove
appealing to U.S. pharmaceutical and biotech firms such as
Bristol-Myers Squibb, Amgen, Gilead
Shire's share price was up 15 percent at over 43 pounds by
1150 GMT, valuing the firm at over 25 billion pounds ($43
billion). Shire said the rejected offer comprised 0.7988 AbbVie
shares and 20.44 pounds in cash for every Shire share.
AbbVie, which has a market capitalisation of around $86
billion, said it made an initial cash and share proposal in
early May with an indicative value of 39.50 pounds per share.
It did not describe the latest offer as final, meaning it
could come back with an even higher price and has been given a
deadline under UK takeover rules to either make a firm intention
to make an offer, or walk away, by 1600 GMT on July 18.
However, analysts at Barclays said that the cost synergies
and tax inversion benefits of the existing offer could be
"With no obvious therapeutic overlaps between AbbVie and
Shire, the prospect for cost savings appears limited to us,"
they said. "We would view Shire as very much a bolt-on
acquisition for AbbVie, albeit one with a $47 billion price tag.
"We also believe the cash component of AbbVie's current
proposal is on the cusp of what it can come up with," the
analysts said, adding, however, that a deal would help AbbVie to
become less reliant on its rheumatoid arthritis drug Humira.
Shire, which specialises in medicines for attention deficit
hyperactivity disorder (ADHD) and drugs to treat rare genetic
disorders, was previously approached by Botox-maker Allergan
months before the U.S. group itself became a takeover
target for Valeant.
Shire is being advised by Citi, Evercore and Morgan Stanley
whilst Abbvie is being advising by JPMorgan.
($1=0.5864 British pounds)
(Editing by Jane Merriman and Greg Mahlich)