AbbVie Acquires Shire

BMI View: The acquisition of Shire will offer AbbVie greater strategic and financial flexibility to enhance its business development objectives and improve shareholder returns. With a lower tax rate and an expanded product portfolio, AbbVie is set to become more competitive among the major multinational pharmaceutical companies.

UK-based pharmaceutical company Shire has accepted a GBP31bn (USD53bn) takeover offer from US drugmaker AbbVie. AbbVie increased its offer to GBP53.2 (USD91.1) per share, after Shire rejected four bids previously. The new bid is comprised of GBP24.44 (USD41.85) in cash and 0.8960 new AbbVie shares for each Shire share. This has given Shire investors around 25% ownership of the combined entity, which allows AbbVie to change its tax residence to the UK. 'It will be domiciled in the UK for tax purposes,' AbbVie's Chief Executive Richard A. Gonzalez said. 'This structure provides AbbVie with flexible access to its global cash flows.' AbbVie expects the effective tax rates for the new AbbVie to be approximately 13% by 2016, which is much lower than the US tax rate (27-30%).

The acquisition of Shire will also expand AbbVie's product portfolio and reduce its dependence on the blockbuster drug Humira (adalimumab), which is set to lose patent protection in December 2016 and April 2018 in the US and EU, respectively. In Q114, AbbVie reported that worldwide sales were USD4.56bn, up 5.4%. Meanwhile, Humira delivered global sales of USD2.64bn, up 18.4%.Shire holds a leading position within treatments of rare diseases, neuroscience, gastrointestinal and internal medicine, and is developing treatments for symptomatic conditions treated by specialist physicians in other targeted therapeutic areas. Shire has been expanding its rare disease portfolio, announcing in May the acquisition of Lumena  Pharmaceuticals, a biopharmaceutical company with rare disease pipeline assets. This followed Shire's purchase of ViroPharma.

Increasing Diversification
Total Revenue And Humira As Percentage Of Total Revenue Before And After Shire Acquisition

AbbVie Acquires Shire

BMI View: The acquisition of Shire will offer AbbVie greater strategic and financial flexibility to enhance its business development objectives and improve shareholder returns. With a lower tax rate and an expanded product portfolio, AbbVie is set to become more competitive among the major multinational pharmaceutical companies.

UK-based pharmaceutical company Shire has accepted a GBP31bn (USD53bn) takeover offer from US drugmaker AbbVie. AbbVie increased its offer to GBP53.2 (USD91.1) per share, after Shire rejected four bids previously. The new bid is comprised of GBP24.44 (USD41.85) in cash and 0.8960 new AbbVie shares for each Shire share. This has given Shire investors around 25% ownership of the combined entity, which allows AbbVie to change its tax residence to the UK. 'It will be domiciled in the UK for tax purposes,' AbbVie's Chief Executive Richard A. Gonzalez said. 'This structure provides AbbVie with flexible access to its global cash flows.' AbbVie expects the effective tax rates for the new AbbVie to be approximately 13% by 2016, which is much lower than the US tax rate (27-30%).

The acquisition of Shire will also expand AbbVie's product portfolio and reduce its dependence on the blockbuster drug Humira (adalimumab), which is set to lose patent protection in December 2016 and April 2018 in the US and EU, respectively. In Q114, AbbVie reported that worldwide sales were USD4.56bn, up 5.4%. Meanwhile, Humira delivered global sales of USD2.64bn, up 18.4%.Shire holds a leading position within treatments of rare diseases, neuroscience, gastrointestinal and internal medicine, and is developing treatments for symptomatic conditions treated by specialist physicians in other targeted therapeutic areas. Shire has been expanding its rare disease portfolio, announcing in May the acquisition of Lumena  Pharmaceuticals, a biopharmaceutical company with rare disease pipeline assets. This followed Shire's purchase of ViroPharma.

Increasing Diversification
Total Revenue And Humira As Percentage Of Total Revenue Before And After Shire Acquisition

The new entity will also leverage AbbVie's broader geographic penetration and scale to provide Shire with the desired infrastructure to establish leadership positions in targeted therapeutic areas. AbbVie's research and development (R&D) platform, which is highly experienced in developing and commercialising speciality pharmaceuticals globally, will also improve Shire's Rare Diseases R&D investments. The larger and more diversified biopharmaceutical company, with a more competitive tax structure, has generated significant interest among investors. On 18 July 2014, when the acquisition was announced, AbbVie's share price was increased by 2.6%, Shire's price was up by 1.4%, while the S&P Index was up by 1.0%.

Deal Welcomed By Investors
Relative Share Performance Of AbbVie, Shire And The S&P Index
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