Shire PLC Willing To Recommend £32bn Bid From AbbVie Inc

There’s a Friday deadline for AbbVie Inc (NYSE: ABBV) to decide whether to make firm offer for Shire PLC (LON: SHP).

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 14 July, 2014 10:31 am BST

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Shares of Shire (LSE: SHP) (NASDAQ: SHPG.US) added 129p to 4,999p during early trade, after the Dublin-based pharmaceutical group said it would be willing to recommend a £31bn takeover proposal from AbbVie (NYSE: ABBV.US).

The revised offer from the US firm is equivalent to £53 per share, and consists of £24 in cash and 0.9 shares of the combined new AbbVie, but there is no certainty that any firm offer will be made.

AbbVie produces the rheumatoid arthritis drug Humira, which is one of the biggest selling drugs in history; however, the product will lose patent protection in 2016.

AbbVie’s move for Shire is driven by a desire to become less reliant on its top-selling blockbuster drug and diversify its drug portfolio, and the deal could also result in large tax savings.

Shire said in a statement that “it would be willing to recommend an offer at the level of the Revised Proposal to Shire shareholders subject to satisfactory resolution of the other terms of the offer.”

We will know by Friday whether AbbVie has made a firm offer to shareholders or decided to walk away. Shire’s share price has been pushed up by 75% year-to-date. Whether shares in the a new combined pharmaceutical group will result in similar outperformance remains to be seen.