A revised proposal made over the weekend comprising £24.44 in cash and 0.8960 new AbbVie shares per Shire share held has been deemed enticing enough for Shire’s board to recommend shareholders accept and it is now in the process of talking through the exact details of a £31bn deal with AbbVie.
The latest proposal implies a value of £53.20 per Shire share, given AbbVie’s share price on 11 July. Should a deal go through former Shire shareholders would own approximately 25% of AbbVie between them.
The top end of the Shire shareholder list is dominated by asset managers with BlackRock at the top holding 5.9%, then comes Fidelity with 4.2%, L&G IM with 3.3%, State Street with 2.8%, Aberdeen with 2.3%, Invesco with 1.9% and Allianz Global Investors with 1.8%.
Merger arbitrage specialist Paulson & Co is also in the top ten with a large position accounting for 1.8% of Shire shares, indicating the firm believes a deal will be done.
Chicago-based AbbVie has pursued Shire doggedly for a number of weeks and seen a series of proposals rebuffed by its board before the latest one brought them to the deal table.
Whether the big shareholders in Shire will take the offer remains to be seen although AbbVie has indicated it has received informal expressions of support from some of them.
Shire shares were trading at around £37 on 20 June before news of AbbVie's interest broke therefore a consideration amounting to £53.20 per share represents a significant windfall.
One potential stumbling block could be the cash plus shares composition. Some fund managers are unwilling or unable to hold US companies in their funds and would typically much prefer an all-cash offer in any takeover.
AbbVie has until Friday 18 July, to turn its proposal into a firm offer unless Shire joins it in a request for an extension from the Takeover Panel.
A primary driver for the deal is so-called ‘tax inversion’ whereby AbbVie will flip its tax domicile to Shire’s home turf of Ireland following completion, and make big savings on corporate rates as a result.
