The headquarters of
Shire Pharmaceuticals, Hampshire. The firm was approached by US company
AbbVie with a £30bn deal. Photograph: Martin Argles for the Guardian
British drug firm Shire Pharmaceuticals has confirmed it has held talks with US rival AbbVie after the American firm proposed combining the two drug makers in a £30bn ($51.34bn) deal.
Amid pressure from shareholders, Shire confirmed that talks had taken place in New York but were at an early stage. In a press release Shire said: "There can be no certainty that any firm offer will be made nor as to the terms on which any firm offer might be made." It "strongly advised" shareholders not to take any action in relation to AbbVie's proposal.
As part of the deal, North Chicago, Illinois-based AbbVie would move its legal address to the UK, a move that would cut its corporate tax rate from 22% to 13%. The difference in tax rates was also one of the driving factors behind US drug fim Pfizer's ultimately unsuccessful $118bn bid for the UK's AstraZeneca and has triggered a political backlash in the US.
AbbVie began its pursuit of Shire in May. The latest talks come as some Shire shareholders have been pushing for the company to finalise a deal with US rival. AbbVie made a fourth offer for Shire on 8 July, valuing the Dublin-based company's shares at £51.15 each, or about £30.1bn in total. Shire's shares rose 5.9% to close at £48.70 in London on Friday, valuing the company at £28.7bn. AbbVie's closed at $54.95 (down 0.76%).
Shire was founded in Britain and is listed in London but is today managed out of Boston, headquartered in Dublin and generates most of its sales in the United States.
Since the raised offer, Shire has been hearing from top shareholders pushing the company to come to the table and work out a deal in letters, telephone calls and meetings with Shire's chairman Susan Kilsby.
Richard Gonzalez, chief executive and chairman of AbbVie, was reported on Tuesday to have said he had spoken to key Shire investors and they were "generally supportive" of his company's £30bn offer.
But AbbVie issued a formal statement on Wednesday in which it rowed back on a boast which appeared to have been made in contravention of Takeover Panel regulations. "AbbVie confirms that it has not received any written commitments of support and accordingly retracts the statements. It acknowledges that in the absence of written statements of support from shareholders it is not in a position to make any statement of shareholder support which accords with the provisions of Rule 19.3."
Under the UK takeover rules AbbVie has until 18 July to make a firm offer for Shire or must withdraw its interest for as long as six months.
The drawn-out takeover battle comes amid a wave of similar deal in the pharmaceutical industry as it struggles with rising pressure on health-care spending and a patent expirations for best-selling drugs that threaten future revenue growth.
Shire's products include treatments and drugs for rare and life-threatening disease like Hunter syndrome or Fabry disease and a medicine for a attention deficit hyperactivity disorder (ADHD) and ulcerative colitis. A deal would broaden AbbVie's products portfolio. Currently more than half the company's sales come from the rheumatoid arthritis injection Humira.
AbbVie may face competition from Allergan, maker of Botox which is battling a $53bn hostile bid from Valeant Pharmaceuticals. This week David Pyott, Allergan's chairman and chief executive, told the Financial Times that shareholders had been "fairly clear that if we have a deal that we can do, we should do it soon".
An AbbVie/Shire deal is certain to reopen the heated political debate in the US over "inversion" – the trend for US companies to takeover foreign rivals and move their headquarters to the new country in order to cut tax rates.
In May as the AstraZeneca bid imploded 14 US Senators introduced a new bill, the Stop Corporate Inversions Act, which would essentially ban inversions for two years while Congress attempts to rewrite the US tax code in order to stem the trend.
Under current law US companies can move their headquarters overseas if foreign shareholders own at least 20% of their stock. The bill would raise that threshold to 50% for two years. The US Treasury has also proposed upping the percentage of foreign ownership needed for a US company to shift its HQ.
Introducing the bill in May senator Carl Levin said: "You've got to stop the bleeding. Any company that seeks to invert from this point on is taking the risk that a bill that is passed would prevent them from benefiting."
A recent report by the Congressional Research Service identified 47 inversions in the last decade, involving US pharmaceutical, financial services, manufacturing industries, and others moving their headquarters to Canada, Ireland, Switzerland, and other countries with lower corporate tax rates.
US pharmacy chain Walgreens is considering an inversion, moving its headquarters to Switzerland, following its planned acquisition of European drug retailer Alliance Boots Holdings. Canada's Valeant has cited tax savings in its proposed takeover of Allergan.
Amid pressure from shareholders, Shire confirmed that talks had taken place in New York but were at an early stage. In a press release Shire said: "There can be no certainty that any firm offer will be made nor as to the terms on which any firm offer might be made." It "strongly advised" shareholders not to take any action in relation to AbbVie's proposal.
As part of the deal, North Chicago, Illinois-based AbbVie would move its legal address to the UK, a move that would cut its corporate tax rate from 22% to 13%. The difference in tax rates was also one of the driving factors behind US drug fim Pfizer's ultimately unsuccessful $118bn bid for the UK's AstraZeneca and has triggered a political backlash in the US.
AbbVie began its pursuit of Shire in May. The latest talks come as some Shire shareholders have been pushing for the company to finalise a deal with US rival. AbbVie made a fourth offer for Shire on 8 July, valuing the Dublin-based company's shares at £51.15 each, or about £30.1bn in total. Shire's shares rose 5.9% to close at £48.70 in London on Friday, valuing the company at £28.7bn. AbbVie's closed at $54.95 (down 0.76%).
Shire was founded in Britain and is listed in London but is today managed out of Boston, headquartered in Dublin and generates most of its sales in the United States.
Since the raised offer, Shire has been hearing from top shareholders pushing the company to come to the table and work out a deal in letters, telephone calls and meetings with Shire's chairman Susan Kilsby.
Richard Gonzalez, chief executive and chairman of AbbVie, was reported on Tuesday to have said he had spoken to key Shire investors and they were "generally supportive" of his company's £30bn offer.
But AbbVie issued a formal statement on Wednesday in which it rowed back on a boast which appeared to have been made in contravention of Takeover Panel regulations. "AbbVie confirms that it has not received any written commitments of support and accordingly retracts the statements. It acknowledges that in the absence of written statements of support from shareholders it is not in a position to make any statement of shareholder support which accords with the provisions of Rule 19.3."
Under the UK takeover rules AbbVie has until 18 July to make a firm offer for Shire or must withdraw its interest for as long as six months.
The drawn-out takeover battle comes amid a wave of similar deal in the pharmaceutical industry as it struggles with rising pressure on health-care spending and a patent expirations for best-selling drugs that threaten future revenue growth.
Shire's products include treatments and drugs for rare and life-threatening disease like Hunter syndrome or Fabry disease and a medicine for a attention deficit hyperactivity disorder (ADHD) and ulcerative colitis. A deal would broaden AbbVie's products portfolio. Currently more than half the company's sales come from the rheumatoid arthritis injection Humira.
AbbVie may face competition from Allergan, maker of Botox which is battling a $53bn hostile bid from Valeant Pharmaceuticals. This week David Pyott, Allergan's chairman and chief executive, told the Financial Times that shareholders had been "fairly clear that if we have a deal that we can do, we should do it soon".
An AbbVie/Shire deal is certain to reopen the heated political debate in the US over "inversion" – the trend for US companies to takeover foreign rivals and move their headquarters to the new country in order to cut tax rates.
In May as the AstraZeneca bid imploded 14 US Senators introduced a new bill, the Stop Corporate Inversions Act, which would essentially ban inversions for two years while Congress attempts to rewrite the US tax code in order to stem the trend.
Under current law US companies can move their headquarters overseas if foreign shareholders own at least 20% of their stock. The bill would raise that threshold to 50% for two years. The US Treasury has also proposed upping the percentage of foreign ownership needed for a US company to shift its HQ.
Introducing the bill in May senator Carl Levin said: "You've got to stop the bleeding. Any company that seeks to invert from this point on is taking the risk that a bill that is passed would prevent them from benefiting."
A recent report by the Congressional Research Service identified 47 inversions in the last decade, involving US pharmaceutical, financial services, manufacturing industries, and others moving their headquarters to Canada, Ireland, Switzerland, and other countries with lower corporate tax rates.
US pharmacy chain Walgreens is considering an inversion, moving its headquarters to Switzerland, following its planned acquisition of European drug retailer Alliance Boots Holdings. Canada's Valeant has cited tax savings in its proposed takeover of Allergan.
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