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Abbvie Courts Ireland’s Shire

Inversion: A deal would bring significant tax savings for the big pharma firm

by Lisa M. Jarvis
June 30, 2014 | A version of this story appeared in Volume 92, Issue 26


Companies in low-tax countries are being pursued.

June 2014: AbbVie offers $46 billion for Ireland-based Shire

June 2014: Medtronic pays $43 billion for ­Ireland’s Covidien

April 2014: Pfizer tries and fails to buy U.K.-based ­AstraZeneca for $119 billion

December 2013: Perrigo pays $8.6 billion for ­Ireland-based Elan

October 2013: Actavis pays $5.0 billion for Ireland’s Warner-Chilcott

Citing an insufficient price, the Irish specialty pharmaceuticals firm Shire has turned down a $46 billion takeover proposal from U.S.-based AbbVie. Industry experts believe AbbVie will continue its pursuit, in part for the tax savings the deal would bring, and other companies may enter the fray.

AbbVie first approached Shire, a London-listed firm that develops rare disease, neuroscience, and gastrointestinal drugs, in early May with an offer worth roughly $66.00 per share. The big pharma firm upped the ante twice before making public its most recent offer, $78.50 per share.

Mounting its case for a higher price, Shire is telling investors that it is on track to double sales of its existing products to $10 billion by 2020. Stock analysts believe the firm is looking for 10–15% above the current bid.

AbbVie, meanwhile, argued to investors last week that its global heft could significantly expand the market for Shire’s products. Moreover, AbbVie could lower its tax rate to about 13% from 22% by moving its headquarters from North Chicago to the U.K.

AbbVie is the latest life sciences firm to pursue a deal that is at least partly motivated by the potential to capture billions of dollars in tax savings. In recent months, several other major drug companies have sought “inversion” acquisitions that would allow them to move their headquarters to the target firm’s home base to lower their tax liability.

For example, had Pfizer succeeded in its attempt to acquire AstraZeneca, the company would have moved its headquarters to the U.K., where, in addition to a lower rate on existing products, a law introduced last year taxes profits on new drugs at just 10%. AstraZeneca warded off Pfizer’s advances, but stock analysts think Shire is amenable to a takeover if the price is right. Under U.K. law, AbbVie has until July 18 to make another bid.

Analysts also say others could join the contest for shire. In April, reports surfaced that Allergan was considering a bid for Shire, and last year talk circulated that Bristol-Myers Squibb was interested in the firm. “Given the disclosure of the [AbbVie] offer, we do believe that this could accelerate other potential acquirers, including Allergan,” Cowen & Co. analyst Ken Cacciatore said in a note to investors.



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