* AbbVie raises bid to 53.20 pounds/share from 51.15
* Deal values Shire at 31 bln pounds
* Bid comprises 24.44 stg cash and 0.8960 new AbbVie shares
* Shire shares hit record high, trading at 50.00
(Adds analyst comment; updates share moves)
By Kate Holton
LONDON, July 14 Shire Plc, which sells drugs for
rare diseases, succumbed to an increased 31 billion pounds ($53
billion) takeover offer from Abbvie Inc on Monday,
signaling the conclusion to a lengthy courtship largely
motivated by tax benefits.
Dublin-based Shire said it would recommend the deal,
the latest in a list of mergers proposed by U.S. companies
seeking to cut tax rates. It comes less than seven weeks after
the collapse of Pfizer Inc's $118 billion bid for
AstraZeneca Plc, also motivated in part by tax factors.
Chicago-based AbbVie, which also wants to diversify its
product lineup, increased the offer to 53.20 pounds per share on
Sunday, following a request from Shire after it had rejected
four previous bids.
Citing people familiar with the matter, Reuters had reported
on Saturday that Shire had asked AbbVie to sweeten its offer to
near 53 pounds per share in order for it to recommend the deal.
Shire said the new bid comprised 24.44 pounds in cash and
0.8960 new AbbVie share for each Shire share, giving Shire
investors about 25 percent ownership of the combined entity.
"This deal makes a lot of sense for AbbVie as it would lower
its tax rate from 22 percent to 13 percent, reduce dependence on
Humira, broaden the (drug) pipeline, and provide some
opportunities for operational synergies," BMO Capital Markets
analyst Alex Arfaei said in a research note.
AbbVie 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.
BMO is estimating the combination would increase AbbVie's
earnings per share by 9 percent in 2015 and 17 percent in 2016.
AbbVie shares were down 1.4 percent at $54.19 on the New
York Stock Exchange, while Shire was up 1.6 percent in London
after earlier hitting an all-time high of 50.45 pounds.
AbbVie would lower its corporate tax rate by moving its tax
base to Britain, a tactic known as inversion. Analysts at
Barclays estimated the move would provide an estimated $1.3
billion in tax savings by 2020.
"Strategically, AbbVie acquires Shire's quality growth
assets in platforms including rare diseases, neuroscience and
ophthalmology, easing investor concerns about overreliance on
Humira and offering future growth opportunities," Barclays said.
FEW INVERSION TARGETS
Analyst Alistair Campbell at banking group Berenberg said
there were few other British drugmakers that would suit a tax
inversion takeover because about 20 percent of shareholders
post-deal must be shareholders in the target company.
"You can't go for small companies," he said. "Glaxo
is too big, Astra has had an approach from Pfizer and Shire has
Smith & Nephew Plc, Europe's largest maker of
artificial joints, has been seen as a possible target.
U.S.-based Stryker Corp has said it would not bid for
the company after reports linking it with a deal circulated in
Sweden's Meda AB rejected an improved takeover
offer from U.S. generic drugmaker Mylan Inc in April,
which could have helped reduce taxes.
The approach for Shire has been far less controversial than
the move for AstraZeneca. While headquartered in Dublin, Shire
is managed from Boston and has most of its sales in the United
States, resulting in a relatively small business footprint in
Shire Chief Executive Flemming Ornskov had said he was happy
for the company to be sold at the right price.
($1 = 0.5877 British Pounds)
(Additional reporting by Bill Berkrot in New York; Editing by
Louise Heavens, David Holmes and Jonathan Oatis)