News Column

Shire Agrees To GBP32 Billion Merger With AbbVie

July 18, 2014

Hana Stewart-Smith

LONDON (Alliance News) - FTSE 100-listed Shire PLC has Friday agreed to merge with US drugs maker AbbVie Inc in a deal that values the pharmaceutical company at approximately GBP32 billion.

Shire has agreed to the merger which will give its shareholders GBP24.44 in cash and 0.8960 of an AbbVie share for each Shire share.

The terms of merger give an indicative value of GBP52.48 pounds per Shire share, based on AbbVie's closing share price of USD53.52 on July 17, 2014; and an indicative value of GBP53.19 pounds per Shire share, based on AbbVie's 30-day volume-weighted average price of USD54.83 to July 17, 2014, the latest practicable date, said the company.

Under the terms of the deal, Shire shareholders will own around 25% of the new company.

The agreement comes after a series of proposals from AbbVie which Shire rebuffed on three separate occasions. Shire said Monday that it was "willing to recommend" a raised takeover offer from the company after it last week made a sweetened proposal of GBP51.15 per share.

The combined market cap of the merged companies would be approximately USD137 billion as of Friday, and AbbVie said in a statement to employees that it would have a combined workforce of around 30,000.

Shire's board has recommended that shareholders vote in favour of the merger, and its directors have irrevocably undertaken to do so in respects of their own holdings of less than 1%.

Abbvie said that the companies have complementary strategies and would add to each others areas of strength, citing that Shire would bring new growth platforms in neuroscience and rare diseases to the merged company. "Both businesses have complementary areas of strength, rather than overlap," said AbbVie in a statement to its employees.

AbbVie expects the merger to add to its earnings per share, excluding amortisation and accounting adjustment amongst others items, in its first year following completion. It expects this earnings per share to grow to USD1.00 per share by 2020.

Importantly, it also expects the merger to reduce its effective tax rate by around 13% in 2016. The new company will be incorporated in Jersey, where Shire is currently incorporated, and it will be listed on the New York Stock Exchange.

"The combination of AbbVie and Shire is attractive for shareholders of both companies, bringing the potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced cash returns to shareholders," said Chief Executive of AbbVie Richard Gonzalez in a statement.

"We believe that this offer reflects the substantial value that we have already created for Shire's shareholders and the strength of our future prospects," said Shire Chairman Susan Kilsby in a statement.

Shares in Shire were trading up 2.6% at 4,929.00 pence Friday morning, the biggest gainer on the FTSE 100.

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Source: Alliance News

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