Shire plc Release: Management Spurns Three Offers From AbbVie (ABBV) , Fighting For Irish Independence, Call Monday Morning
6/23/2014 12:42:43 PM
• On Friday, June 20, Shire confirmed the receipt of several proposals from
(ABBV $53.30) for the purchase of the company using a mixture of cash
The press release detailed three separate offers that have already been m
5, May 13, and May 30. The latest rejected proposal was for about $46.3
27.2 billion). Exhibit 1, on page 2, details the composition of each bid in
value based on AbbVie’s 30-day volume weighted average share price (a
currency exchange rates), and the premium to Shire’s shares. Manageme
call on Monday, June 23, at 8 a.m. ET to discuss the unsolicited offer.
• AbbVie’s attempt to purchase Shire is the latest attempt by U.S. companies to
purchase foreign companies through a mixture of cash and equity, with the combined
company domiciled in a lower tax rate country. Shire’s tax rate guidance for 2014 is
between 18% and 20% and there is relatively little overlap between the two
companies’ existing franchises. Both companies aspire to enter the opthalmology
segments; Shire is developing lifitegrast for dry eye and Premiplex for retinopathy of
prematurity (ROP) and AbbVie may expand Humira into non-infectious uveitis with a
Phase III program in progress.
• Shire’s board confirmed that it had met with AbbVie before unanimously rejecting
the proposal on the basis that the proposal fundamentally undervalued the company.
In its press release, Shire noted new management’s achievements of accelerated
growth and increased shareholder returns over the last 12 months, the potential
doubling of annual product sales to $10 billion by 2020, and Shire’s growth strategy.
Unlike the ongoing Allergan (AGN $165.32; Outperform)/Valeant (VRX $121.93)
hostile bid and defense, it will be difficult to argue that new management at Shire has
not executed well, increasing EBITDA margin from 37% a year ago to 45%, an
industry-best mark for cash generation. Management has also deployed capital
aggressively by purchasing ViroPharma, Inc. for $4.2 billion in January 2014 and
Lumena Pharmaceuticals Inc. for $260 million in May 2014 on top of acquiring
lifitegrast and Premiplex over the past year.
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