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Borrowing from the film, Poltergeist, “They’re baaaaack.” Just moments ago, Abbvie Inc. (NYSE:ABBV) put another offer on the table to acquire UK-based specialty pharmaceutical company, Shire Plc (LSE:SHP). AbbVie’s previous offer, made in June, was unequivocally rejected by Shire’s board of directors. Today’s offer is the fourth attempt by AbbVie to draw Shire into its net.
The June offer proffered by ABBV placed a value of £27 billion ($46 billion) on Shire. At that time, the Shire share price was 3,738.00. Susan Kilsby, Shire’s Chairwoman, had said quite clearly then that, “The Board believes the proposal fundamentally undervalued Shire and its prospects and that as an independent company Shire’s focused growth strategy will continue to deliver significant shareholder value and patient benefits.”
Shire 52-Week Chart
Currently, Shire shares are selling at 4,641.00 following a spike to 4,771.00 just before 1:00 pm GMT, just about the time ABBV made its announcement. At its current selling price, Shire is valued at £27.04 billion. Seems like Ms. Kilsby was right.
Today’s offer, which ABBV CEO, Richard Gonzalez claims is “a compelling” one, is in the amount of £30 billion. However, perhaps the way that ABBV made the offer is more strategic than the amount of the offer itself. First of all, with an obvious current value of £27 bilion, ABBV has got to offer a premium, but deals like this are typically presented at the board level. This one was announced publicly as a direct appeal to the Shire shareholders.
Gonzalez stated that, “We think [Shire’s] shareholders should strongly encourage the Shire board to engage in constructive dialogue with AbbVie.” Clearly ABBV is employing a flanking tactic, making its 5,115.00 per share offer directly to the shareholders, hoping to get them to go for the fast money rather than stay with Shire for the long haul and its own particular prospects for growth. Shire Chairman, Flemming Ørnskov, “has set out a plan to double sales over the next seven years in an attempt to remain independent.”
Not only was the ABBV offer made public, it gave Shire no advance notice of the offer. The board has advised shareholders to be patient until the board can meet, consider the proposal, and make known their response “in due course.”
It should also be noted that Gonzalez spoke with a number of Shire shareholders which, together, represent a voting majority, before going public with the offer. He claimed that “they are generally supportive of this transaction and I can tell you that this offer is responsive to the feedback we have received.”
It continues to be apparent that ABBV’s real goal is to establish a base in Ireland as a tax haven where the 11% corporate tax is especially attractive versus that of companies based in the U.S. as ABBV currently is.
The question now becomes one about what investors truly believe about Shire. That is, are they “invested” in Shire, or are is it just all about their money? We’ll soon find out, as the deadline for action is 18 July. Given the activity of the Shire share price over the past 52 weeks, it would be difficult to understand why investors would decided to sell out.
