Shire Goes Shopping After AbbVie Deal Falls Through

Shire Goes Shopping After AbbVie Deal Falls Through

October 20, 2014

By Riley McDermid, Breaking News Sr. Editor

Irish biotech Shire Pharmaceuticals is rebounding from the breakup of its $55 billion merger with drugmaker AbbVie by doing some shopping itself, news outlets reported over the weekend.

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.

Potential 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 Thursday that shareholders reject the $55 billion deal after pressure from the Treasury Department over so-called “tax inversion” deals became untenable. 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. If approved by shareholders, the failed deal will cost AbbVie around $1.6 billion, the third largest breakup fee in financial history. That money could then be ploughed right back into the acquisition of smaller, more complementary targets, however, said analysts this week.

“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.

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