Sector News

Shire goes shopping after AbbVie deal falls through

October 20, 2014
Life sciences
Shire is considering its acquisition options in the US following the breakdown of its £32bn takeover by AbbVie, which could boost the London-listed drugmaker’s war chest by $1.6bn (£1bn) in break fees.
The FTSE 100 company is believed to have reopened discussions with various takeover targets, including NPS and Cubist, it was reported over the weekend.
 
In June, rumours that Shire had amassed a $5bn credit facility to finance a bid for NPS Pharmaceuticals were put to an end when AbbVie announced its multibillion pound takeover offer.
 
Shire has also been previously linked to Cubist. It was reported in 2011 that Shire had approached the Massachusetts-based pharma firm, which makes a drug that battles the “superbug” MRSA, with a £2bn takeover offer.
 
Investors have wiped more than a quarter off Shire’s value since Tuesday, when AbbVie’s board urged shareholders to vote against its proposed £32bn takeover of Shire. Its directors cited the “unacceptable level of uncertainty” following Washington’s recent clampdown on so-called “tax inversion” deals.
 
The US Treasury’s new tax rules, which aims to prevent US companies from dodging corporation tax by spending trapped cash on overseas acquisitions, could have cost AbbVie an extra $7bn, a senior tax lawyer estimated.
If the takeover crumbles, AbbVie could have to pay Shire up to $1.6bn, the third biggest break fee on record, according to Dealogic.
 
The collapse of the AbbVie deal sparked analyst speculation that Shire could jump back on the acquisition trail, less than a year after the completion of its $4.6bn purchase of ViroPharma, its biggest takeover to date.
 
Peter Welford at Jefferies wrote in a note, “Including the potential $1.6bn break fee from AbbVie, Shire could be even more favourably positioned to execute on its own acquisition strategy.”
 
The appointment earlier this year of Susan Kilsby, formerly an investment banker, as Shire’s new chairwoman – less than a year after acquisition-hungry chief executive Flemming Ornskov took the helm of the Basingstoke-based drugmaker – increased expectation that the company would embark on a shopping spree.
Shire reports third-quarter results on Friday.
 
By Lauren Davidson
 

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