AbbVie’s cash wins Shire’s heart in year's biggest cross-border drug takeover

 
Michael Bow
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Shire, led by Flemming Ornskov, has been won around by AbbVie's beefed-up bid
UK drug maker Shire relented to US rival AbbVie’s takeover attempts yesterday and accepted a sweetened £31.4bn offer for the group, opening the door to the biggest cross-border drug takeover this year.
Shire’s board, led by ex-M&A banker Susan Kilsby, will recommend the £53.20 a share offer, which is comprised of £24.44 in cash and the rest in shares.
The bid was the fifth tabled by AbbVie boss Rick Gonzalez to his Shire counterpart Flemming Ornskov on Sunday and brings the 10-week drama to its final act.
Banking advisers for both sides will now iron out the deal’s details before a regulatory deadline expires on Friday, although an extension can be requested by Shire.
“There’s lots of detail to go through yet,” Panmure Gordon’s Savvas Neophytou, who previously worked on M&A deals, said. “These bankers are not going to be getting much sleep.”
AbbVie, which was spun out of Abbott Laboratories in 2013, is bigger than Shire, with revenues of $18.8bn versus Shire’s $5bn. It has about 25,000 staff around the world against Shire’s 5,000 employees.
The merged group, dubbed “ShabbVie” by analysts, will move its tax base to the UK from the US to take advantage of Britain’s lower corporate tax rates.
Shire shareholders will own about 25 per cent of the merged group, a pre-condition of so-called tax inversion strategies, which say that at least 20 per cent of shareholders must be from the host country.
Yesterday US drug firm Mylan snapped up Abbott Laboratories’ generic drug business for $5.3bn by pursuing a similar strategy. It will to re-domicile its tax base in Holland.
The new AbbVie Shire board has not been finalised but Gonzalez’s prior retirement in 2007 hints he could be tempted back from the front line.
Shire’s boss Flemming Ornskov, meanwhile, has also won admirers for driving up the value of business, which was valued at $20bn just a year ago, laying the ground for a potential appointment as chief executive.

BEHIND THE DEAL

Bankers on the deal are expected to share a fee jackpot of up to $177m (£103.6m), according to figures from Thomson Reuters and Freeman Consulting. Shire used its retained corporate brokers Deutsche Bank and Morgan Stanley but also enlisted Evercore, Citi and then Goldman Sachs to work on the defence.
Evercore’s Francois Maisonrouge (above left) brought his experience of fending off Pfizer for Astrazeneca earlier this year to the table, while Citi’s veteran healthcare banking boss Christopher Hite – who has worked with everyone in pharma from Pfizer and Serono to Warner-Chilcott – was also on board.
A late addition was Goldman Sachs’ Raj Shah, a former cardiac surgeon, who is considered one of the world’s top pharma bankers.
Shire was bolstered by its chairman Susan Kilsby (above right), a former First Boston takeover expert who cut her teeth in the mega mergers of the 1980s.
AbbVie, meanwhile, drew on the expertise of just one bank, JP Morgan. Its co-head of healthcare M&A Henry Gosebruch worked on the deal.

WHAT IT TOOK TO GET THE DEAL OVER THE LINE

£38.97
5 May
Original offer of £16.23 in cash and 0.7680 of AbbVie shares
£39.96
13 May
Second offer made comprised of £17.13 in cash and 0.7680 AbbVie shares
£46.11
30 May
Third offer of £20.44 in cash and 0.7988 AbbVie shares. “fundamentally undervalued” firm
£51.15
8 June
Fourth offer £22.44 in cash and 0.8568 AbbVie shares. Not rejected by board.
£53.20
14 July
Offer of £24.44 in cash and 0.8960 shares recommended by Shire board

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