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* U.S. group says $46 bln bid offers "compelling" value
* Says Shire assets would be worth more in enlarged group
* Says deal would boost new AbbVie's adjusted EPS materially
* Effective tax rate seen around 13 percent by 2016
* Analysts and investors looking for sweetened offer
By Ben Hirschler
LONDON, June 25 U.S. drugmaker AbbVie
said on Wednesday it wanted to move rapidly to clinch a takeover
of Shire as it set out the strategic rationale for
buying the London-listed company, which has spurned its $46
AbbVie called for talks and said it was willing to move
"quickly and cooperatively" to get a deal, arguing it would
create more value from Shire's assets than the hyperactivity and
rare diseases specialist could do on its own.
One person familiar with the matter said AbbVie, which
stands to cut its tax bill through the deal, could consider
bidding more but first wanted to explain its case to Shire
shareholders and hear their views on valuation.
Chief Executive Richard Gonzalez and AbbVie's senior
management plan to meet with U.S. investors in New York on
Thursday and Friday, with further meetings planned for London
next week, sources close to the situation said.
Questioned by analysts, Gonzalez declined to rule out a
hostile bid but said his preference was to engage with Shire's
management to better understand the upbeat drug sales forecasts
set out by the company on Monday.
Gonzalez said he was "even more interested" in Shire after
hearing its plans to more than double sales by 2020 - but he
questioned some of the assumptions behind the bullish figures.
Buying Shire for $46 billion would boost adjusted earnings
per share "materially" in the first year following completion,
growing to above $1 per share by 2020, AbbVie added - a comment
some analysts said suggested it had plenty of room to increase
Although the U.S. group insisted its proposal offered
"compelling" immediate value, with significant future upside,
many investors believe it will have to pay more than 50 pounds a
share to get a deal done, rather than the 46.26 pounds implied
in its last cash-and-shares offer.
Shire said AbbVie's announcement provided no material new
information and reiterated its belief that the offer
fundamentally undervalued the company.
Barclays and Jefferies analysts said the U.S. company could
make a Shire deal pay at a price of up to 55 pounds and 65
pounds a share, respectively, while Bank of America Merrill
Lynch put the theoretical takeout range at 50-62 pounds.
Buying Shire would allow AbbVie to join a growing number of
companies to move their tax base out of the United States and
would give it an effective tax rate of around 13 percent by
2016, against 22 percent last year. The enlarged company would
be managed from Chicago, listed in New York and incorporated in
the British island of Jersey.
It is the second attempt by a U.S. pharmaceutical company to
buy a London-listed rival, after Pfizer's $118 billion
pursuit of AstraZeneca failed last month.
Despite criticism from Shire that the nature of the deal
would create risks for shareholders, AbbVie said it had
thoroughly assessed the tax and structuring aspects and believed
the transaction was "highly executable".
AbbVie's pitch comes as Shire won new ammunition for arguing
its worth following a U.S. court decision backing patent claims
on its top-selling hyperactivity drug Vyvanse.
AbbVie is eager to buy Shire, both to reduce taxation by
redomiciling in Britain - a tactic known as inversion - and to
diversify its drug portfolio. The U.S. company currently gets
nearly 60 percent of its revenue from rheumatoid arthritis drug
Humira, the world's top-selling medicine, which loses U.S.
patent protection in late 2016.
But Gonzalez needs to sell AbbVie's marketing clout and
financial strength to Shire shareholders, since they would end
up owning shares in the enlarged group. AbbVie has already
raised its profit forecast for 2014, citing a strong business
AbbVie was created as a spin-off from Abbott Laboratories
and listed in January last year, since when Gonzalez
said it had delivered a 64 percent total return to shareholders.
SHIRE SHARES GAIN
Shares in Shire, which surged on Friday after news of
AbbVie's takeover offer emerged, hit a new all-time high of
46.63 pounds before slipping back to close 2.6 percent higher at
45.17 pounds, while the Stoxx Europe 600 drugs sector index
lost 0.8 percent.
Shire's chief executive Flemming Ornskov said on Monday he
was happy for the company to be sold at the right price, if the
board recommended it, as he set out a detailed case as to why
AbbVie's offer fell short.
Under British takeover rules AbbVie has until July 18 to
announce a firm offer for Shire or walk away. The U.S. company
said it reserved the right to introduce other forms of
consideration and vary the cash-and-share mix of the bid.
(Additional reporting by Olivia Oran in New York; Editing by
Tom Pfeiffer and Greg Mahlich)