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 The London-listed company, which makes expensive medicines to treat
rare diseases, fought off four earlier bids from AbbVie until the
U.S. firm raised its price to 52.48 pounds per share - made up of
24.44 pounds in cash and 0.8960 new AbbVie shares.
Chicago-based AbbVie is buying Shire to cut both its U.S. tax bill
and its reliance on arthritis drug Humira, the world's top selling
medicine which loses U.S. patent protection in 2016. AbbVie, which
generates nearly 60 percent of its revenue from Humira, had until
Friday to announce a firm offer for Shire, extend the deadline or
walk away under UK takeover rules.
It now plans to create a company listed in New York, incorporated in
Jersey, the Channel Islands, and tax-domiciled in Britain, which
will pay an effective tax of about 13 percent by 2016, sharply lower
than its current rate of about 22 percent, making the deal one of
the biggest driven by the tactic known as tax inversion.
America's Pfizer Inc tried to pull off the same trick earlier this
year when it made a bid for Britain's AstraZeneca plc though its
$118 billion deal was rejected.
Calls for political action to stop tax inversion deals are growing
in the United States. U.S. Treasury Secretary Jacob Lew urged
Congress this week to take steps to discourage companies moving
their tax domiciles aboard, saying "economic patriotism" was needed.
Dick Durbin, the No. 2 Democrat in the U.S. Senate, criticized
AbbVie for moving after using taxpayer-supported medical research to
become one of the United States’s most profitable companies.
"It was our government’s patent office which protected their
discoveries and guarded their right to make a profit,” said Durbin
of Illinois. “Now AbbVie is ‘moving’ to an Irish island to escape
paying the U.S. taxes it owes.”
AbbVie's Chairman and Chief Executive Officer Richard Gonzalez said
he thought the debate would be more appropriately shifted to tax
reform and making companies more competitive in the global economy.
U.S. companies cannot move overseas earnings back into the country
for acquisitions or investment without losing part of it to the
taxman.
"Companies like ours need access to our global cash flows to be able
to make investments all around the world, but specifically to be
able to make investments in the United States, and today we at a
disadvantage versus many of our foreign competitors," he said.
However, he added, tax cutting was not the main objective of the
Shire deal.
"It's not the primary rationale for this," he told analysts on a
conference call, explaining that the combined group would have
leadership positions in immunology, rare diseases, neuroscience, and
metabolic and liver diseases, as well as a best-in-class product
development platform, a stronger pipeline and better R&D
capabilities.
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The merged group will also have more firepower for acquisitions, he
said, particularly to bolster the rare disease business, the
foundations of which were built on acquisitions by Shire.
RAISED GUIDANCE
Shire's board had said on Monday it was ready to recommend the
higher offer from AbbVie, signaling the end of a lengthy courtship.
AbbVie's agreed price represents a premium of about 53 percent to
Shire's share price on May 2, the last business day before AbbVie's
first offer, which was rebuffed by Shire.
Shares in Shire, which will own about 25 percent of the combined
group, closed 3.9 percent higher at 49.96 pounds, while AbbVie was
up 2.1 percent to $54.65 at 1615 GMT.
Gonzalez said Shire Chief Executive Officer Flemming Ornskov, whose
tenure at the drugmaker was marked by earnings upgrade after
earnings upgrade, would stay on, initially to help with integration
and then to head a dedicated rare disease division.
Separately, Shire raised its earnings guidance for the year on
Friday, to low-to-mid 30 percent growth, from mid-to-high 20 percent
growth. The company, which also produces hyperactivity drug Vyvanse,
reported record revenue of $1.5 billion for its second quarter and a
42 percent jump in its preferred earnings measure of non-GAAP
adjusted earnings per ADS to $2.67.
Shire was advised by Goldman Sachs, Morgan Stanley, Deutsche Bank,
Evercore and Citi, while AbbVie was advised by J.P.Morgan.($1 =
0.5847 British Pounds)
(Editing by Sophie Walker and Lisa Shumaker)
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