AbbVie to Acquire Shire for $54.7 Billion

UPDATE (Oct. 16, 2014)...Reuters is reporting that AbbVie's Board of Directors has recommended that shareholders vote against the proposed takeover of Shire. If AbbVie's shareholders do decide to withdraw the offer, Shire may receive a $1.64-billion break fee.

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The Boards of AbbVie and Shire have announced that they have reached agreement on the terms of a combination of the companies valued at $54.7 billion (£32.26 billion). Under the terms of the merger, Shire shareholders will be entitled to receive £24.44 in cash and 0.8960 shares of New AbbVie stock for each Shire share.  

To undertake the transaction, AbbVie has formed a new company, New AbbVie, which is incorporated in Jersey, UK, Shire's current place of incorporation. Following completion of the transaction, New AbbVie will become the holding company of the Shire Group and the AbbVie Group. By incorporating in the United Kingdom, AbbVie can reduce its effective tax rate from the current 22% to approximately 13%, analysts report.

The accepted transaction represents a premium of approximately 53% to the price of Shire shares on May 2, 2014, the last business day prior to AbbVie's initial proposal.

 “The Transaction will create a well-positioned and focused specialty biopharmaceutical company, with sustainable leadership positions within areas of unmet need, including immunology, rare diseases, neuroscience, metabolic diseases and liver disease (HCV) and multiple emerging oncology programs,” according to a statement released by the companies.

Immediately following the merger, Shire shareholders are expected to hold New AbbVie shares representing approximately 25% of the issued share capital of New AbbVie. AbbVie Stockholders are expected to hold approximately 75% of the issued share capital of New AbbVie.

According to the statement, the Shire Board believes that the terms of the transaction are in the best interests of Shire shareholders as a whole and intends to recommend that Shire shareholders vote in favor of the resolutions to be proposed at the Court Meeting and the General Meeting. The AbbVie Board has approved the Transaction and intends to recommend that AbbVie Stockholders vote in favor of the adoption of the US Merger Agreement.

Pursuant to the AbbVie Merger, AbbVie Stockholders will receive one New AbbVie Share for each AbbVie Share.  It is intended that the New AbbVie Shares will be listed on the New York Stock Exchange. The merger is expected to be completed in the fourth quarter of 2014.

"By combining AbbVie and Shire, we're creating a unique, diversified biopharmaceutical company. The combined company would benefit from a best-in-class product development platform, a stronger pipeline and more enhanced R&D capabilities. The combination of AbbVie and Shire is attractive for shareholders of both companies, bringing the potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced cash returns to shareholders. The combination would provide us with enhanced access to cash that we can use to expand our portfolio and fund M&A to supplement organic growth," said Richard A. Gonzalez, chairman of the board and chief executive officer of AbbVie in a statement.

"Shire has a long track record of delivering value for both shareholders and patients. Our growth profile has been accelerated under our new management team who have successfully executed a focused strategy. We believe that this offer reflects the substantial value that we have already created for Shire's shareholders and the strength of our future prospects. We believe that the combined group represents an exciting fit of two complementary businesses that will create a new market leader in specialty pharmaceuticals with a portfolio of fast growing products, a promising pipeline and enhanced growth prospects," said Susan Kilsby, chairman of Shire, in the statement.

Sources:
Shire and AbbVie