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Shire Opens Door to Takeover by AbbVie

Stocks in this article: SHPG ABBV

LONDON (The Deal) -- Irish drugs maker Shire (SHPG) on Monday said it had entered detailed discussions with suitor AbbVie (ABBV) about a fifth takeover proposal after eliciting a sweetened bid that values its stock at 31.4 billion POUNDS ($53.7 billion).

The Dublin maker of attention deficit hyperactivity disorder drug Vyanese said the new proposal values its stock at 5,320 pence per share, breaking down into 2,444 pence in cash and 0.8960 of a new AbbVie share. The takeover would give Shire shareholders about 25% of the combined company.

"The board of Shire has indicated to AbbVie that it would be willing to recommend an offer at the level of the revised proposal to Shire shareholders subject to satisfactory resolution of the other terms of the offer. Accordingly, the board is in detailed discussions with AbbVie in relation to these terms," it said.

Shire shares were up 123 pence, or 2.5%, at 4,993 pence by late morning in London.

The rapprochement counters initial expectations that the two sides would never see eye to eye on price, even though Shire CEO Flemming Ornskov said early on he was open to a deal in principle. It follows abortive bids by U.S. companies for two other major London-listed healthcare targets: Pfizer (PFE) 69.4 billion pound bid for AstraZeneca (AZN), which the New York company pulled in late May after the London target rejected a string of proposals; and Stryker Corp.'s exploratory work on an offer for devices maker Smith & Nephew plc, which ended before it had taken shape after an early media leak forced the U.S. company to retreat.

AbbVie's latest bid is 9.2% more than Shire's Friday closing price. AbbVie's bid interest first came to light on June 20, with the disclosure that it had made an offer worth 4,626 pence share on May 30. Analysts at the time said AbbVie, of North Chicago, may have to offer as much as 5,500 pence per share.

The Shire takeover would be the second big-ticket deal in the pharma sector in recent weeks motivated at least in part by so-called tax inversion after Minneapolis-based Medtronic (MDT) in June agreed to buy Irish rival Covidien (COV) for $42.9 billion to lower its tax bill by switching its domicile.

The latest AbbVie proposal remains subject to various conditions, including clearance from the U.S. company's own shareholders, Shire board backing and due diligence.

Shire, which had confirmed on Friday it had held a meeting with AbbVie executives, issued the standard disclaimer than an offer may not result from the talks. AbbVie has until 5 p.m. Friday to formalize its offer or retreat, unless Shire asks the Takeover Panel to give the two companies more time.

AbbVie, which was spun off from Abbott Laboratories in January 2013, has struck a string of licensing deals since gaining independence but the Shire takeover would be by far its largest transaction, and create the world's ninth-largest drugs company.

AbbVie's advisers are a trans-Atlantic JPMorgan & Co. team of Jeffrey Hoffman, Henry Gosebruch, Benjamin Wallace, Laurence Hollingworth, Dwayne Lysaght and James Robinson.

Shire's advisers are Citigroup Inc.'s Christopher Hite and Jan Skarbek; Evercore Group LLC's Francois Maisonrouge and Edward Banks; and Morgan Stanley's Michele Colocci, Colm Donlon and Peter Moorhouse. Davis Polk & Wardwell LLP's George R. Bason Jr., William J. Chudd and colleagues are providing legal advice to Shire.

The Takeover Panel told AbbVie on Wednesday to retract comments made by chairman and CEO Richard Gonzalez in media interviews the day before about the level of support he believed he had from Shire shareholders for a 5,115 pence-per-share bid announced on Tuesday. Under the Takeover Code, such statements can only be made when shareholders have issued written confirmation of their intentions.

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