This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Great Deal! AbbVie Will Buy Shire and Investors Will Be Rewarded

Stocks in this article: ABBV SHPG MDT COV GE ALSMY

NEW YORK (TheStreet) -- Nothing gets investors riled up like mergers and acquisitions. A great deal can present a company that has tons of cash with instant access to growth, allowing it to conquer new markets that would have otherwise take years to achieve.

Although AbbVie's (ABBV) $51.5 billion offer (upped from $46.5 billion) for drug maker Shire (SHPG) has been rebuffed on multiple occasions, investors should not get discouraged.

AbbVie, which saw an almost 9% jump in its stock price when the rumors of the deal first emerged two weeks ago, has given back almost all of those gains. With Thursday's close of $55.79, shares are still up almost 6% year to date.

>>Allergan CEO David Pyott Hunting Acquisitions to Fend Off Valeant

>>14 Insanely Important Biotech/Drug Trading Catalysts for the Rest of 2014

These deals take time. Medtronic's (MDT) $43 billion deal for Covidien (COV) was rumored for almost a year before both companies realized they needed each other. The most recent example is General Electric's (GE) on-again/off-again dance with Alstom (ALSMY).

Negotiating tactics aside, what I think is most important to remember are the accretive benefits for the acquiring companies. In the case of AbbVie, there are plenty, which should boost the stock towards the $70 level in the next 12 months.

According to Mark Percell, analyst at Barclays, a deal for Shire could yield close to 20% in accretive earnings for AbbVie in the next six years --and that's not even factoring AbbVie's already strong drug business being anchored by its blockbuster arthritis drug Humira.

Humira accounted for close to 60% of AbbVie's total revenue in 2013. AbbVie's management understands that it can't live on Humira indefinitely. This is where Shire comes in.

Shire would make AbbVie immediately more diversified. I believe Shire's ability to unlock incremental value to be the main reason why AbbVie recently upped its offer by 10%.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs