Deals and IPOs

Shire-AbbVie deal collapses: What next?

JB Reed | Bloomberg | Getty Images

U.S. pharmaceutical company Abbvie has called time on its $54 billion offer for Ireland-based Shire, after its board said it would no longer recommend the bid to shareholders.

This leaves AbbVie staring at the 2016 expiry of patents on its best-selling Humira skin disease drug without much to replace it, but with a hefty pile of overseas cash.


Shire's offices in the Citywest Business Campus in Dublin, Ireland.
Abbvie recommends shareholders reject Shire deal

Shire stands to receive a $1.6 billion payout if, as expected, AbbVie shareholders vote against the deal. Yet this is far from enough to replace the £13 billion wiped off its market value Wednesday, after the news that AbbVie was reconsidering its bid broke on Tuesday night. The company's share price is expected to fall even further on Thursday.

Shire has been a market darling for years, with major shareholders including BlackRock and Fidelity as well as several big U.K. institutions, and hedge funds.

One major shareholder is Paulson & Co, the hedge fund founded by billionaire John Paulson, which issued a statement Wednesday urging AbbVie to go ahead with the deal.


John Paulson on Allergan as Valeant takeover target
VIDEO1:5801:58
John Paulson on Allergan as Valeant takeover target

Shire took the unusual step of waiving the three days' notice required for the AbbVie board to meet after announcing it was re-examining the $54 billion offer, in an effort to avoid further huge share price plunges. The company said Thursday it is "considering the current situation and a further announcement will be made in due course."

Shire shareholders looking for crumbs of comfort should consider that the company could now be in an even stronger position to buy up more "orphan drugs" – treatments for rare conditions, which can be highly lucrative. It had already built up a $12 billion borrowing capacity to fund acquisitions, as analysts at Jeffries point out.


AbbVie-Shire: Final nail in inversion coffin?

"Shire's fundamentals appear strong and the stock looks oversold," Jeffries analysts argued in a note published Thursday morning.

And there may even be another bid for this perennial takeover target. Allergan, currently subject to a bid from Valeant, backed by the well-known activist investor Bill Ackman of Pershing Square Capital Management, has already been mentioned as a potential suitor for Shire.


- By CNBC's Catherine Boyle