Shire in talks with US drugmaker AbbVie over £30bn bid

Published Sat, Jul 12 20147:14 AM EDTUpdated Sat, Jul 12 20147:52 AM EDT

Arash Massoudi and Andrew Ward in London and Ed Hammond in New York

Dawson | Bloomberg | Getty Images

Shire has opened talks with AbbVie, the US drugmaker, over its proposed £30 billion ($51 billion) takeover bid for the UK-listed specialty pharma company in a sign that the two parties may be moving closer to a deal.

Shire confirmed it had held a meeting with AbbVie in a short statement late on Friday.

According to people familiar with the matter, senior executives from both companies met in New York to discuss AbbVie's £51.15 per share offer for Shire.

Talks began on Thursday, when Rick Gonzalez, AbbVie chief executive, flew to the New York area to meet Susan Kilsby, Shire chairman, and Flemming Ornskov, chief executive. But he later returned to Chicago, leaving colleagues to continue the talks. Both companies declined to comment.

It is not the first time the two sides have met since AbbVie launched its pursuit in May. Brief talks have previously taken place in Geneva and Paris but did not lead to full-blown negotiations and people close to the situation said there was no guarantee a deal would materialize from the latest meeting.

Shares in Shire closed 5.9 per cent higher to £48.70 in London, while AbbVie fell 1.2 per cent to $54.75 in midday New York trading.

The talks come as some large Shire shareholders have privately pushed for the company to engage with AbbVie, which this week launched its fourth offer to acquire it since early May.

On Wednesday, AbbVie was forced to make an unusual retraction of statements Mr Gonzalez made to news outlets including the Financial Times that Shire shareholders were "generally supportive" of its attempts to acquire the company.

Under UK Takeover Code rules – which regulate mergers and acquisitions activity – a company cannot claim to have shareholder support unless it is stated in writing.

Despite the glitch, analysts said Mr Gonzalez was probably right in his assessment of investor sentiment. John Boris at SunTrust Robinson Humphrey said AbbVie's latest offer was "largely in step" with what shareholders wanted.

Shire's board, led by Ms Kilsby, a former investment banker, has yet to respond publicly to the bid – an 11 per cent improvement on its previous proposal.

Mr Boris predicted it could be good enough to bring Shire to the table but a further increase was probably needed to clinch a deal.

UK takeover rules give AbbVie until July 18 to make a firm offer or walk away. Some analysts think rival bidders could yet step in, attracted by Shire's fast-growing rare diseases business – as well as the potential for US companies to use overseas acquisitions to lower their tax rate.

Allergan, the maker of Botox which is resisting a $53 billion hostile bid from Valeant, this week said it was open to a sizable acquisition but David Pyott, chief executive, refused to comment on speculation that Shire could be a target.

Mr Boris said he felt that Allergan had been "priced out of the running" by AbbVie's latest bid.

A takeover of Shire would add to the wave of dealmaking in the healthcare sector, with $260 billion of mergers and acquisitions among pharmaceuticals, medical and biotech companies so far this year, according to Mergermarket. This has accounted for 16.4 per cent of total global M&A activity.

Several of the deals have involved US companies, including AbbVie, buying European companies as a way to shift their tax domiciles across the Atlantic in order to shield offshore cash from high US rates.