Shire Stands To Grab $1.6B From AbbVie In Third Largest Breakup Fee In History
October 24, 2014
By Riley McDermid, BioSpace.com Breaking News Staff
Irish biotech Shire Plc stands to make $1.6 billion from a mandatory breakup fee paid by drugmaker AbbVie after jilting the company earlier this month—the third largest such fee paid in financial history.
AbbVie scuttled the $55 billion merger last week after American regulators tightened U.S. tax regulations that would have made the deal extremely lucrative for the larger firm.
Shire’s management reported Thursday that it would see breakup-related costs of around $28.4 million, not including the $19.1 million it spent during the second quarter on the merger. But those will all be handily absorbed by AbbVie’s soon-to-come $1.6 billion penalty fee. Meanwhile, Shire is rebounding heartily and doing some shopping itself, said the company’s management.
"We have significant firepower," Flemming Ornskov, chief executive of Shire, said of the breakup money. "Certainly enough to consider the kind of targets we think will drive our growth."
Since news of the merger’s collapse broke last week, investors in the capital markets worldwide have given Shire’s shares a 25 percent or more haircut—and it’s clear the company is looking to stop the bleeding by making a strong, decisive move to rebuild value.
“Including the potential $1.6 billion break fee from AbbVie, Shire could be even more favorably positioned to execute on its own acquisition strategy,” wrote biotech analyst Peter Welford from Jefferies and Co. in a note to investors earlier this week.
Possible takeover targets include Cubist and NPS Pharmaceuticals and could make use is $5 billion credit facility Shire built last year. The buying spree would pick up where Shire left off after snapping up ViroPharma for $4.6 billion last year. Shire has previously been rumored to be eyeing Cubist, though no formal bid was ever made.
AbbVie recommended last Thursday that shareholders reject the $55 billion deal after pressure from the Treasury Department over so-called “tax inversion” deals became untenable and the board agreed earlier this week. The deal was also likely thwarted by a decision made by the Irish government Monday to close lucrative tax loopholes for foreign countries domiciled in Ireland.
The two companies had announced in July of this year that they intended to merge. Chicago-based AbbVie is the manufacturer and marketer of the blockbuster arthritis drug Humira, which will lose U.S. patent protection in 2016.