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!

With Tips From Pfizer, AbbVie Lands the Biggest Pharma Deal of the Year: StockTwits

Stocks in this article: PFE AZN ABBV SHPG

NEW YORK (TheStreet) --Orchestrated by many of the deal wizards who led Pfizer's (PFE) bidding for AstraZeneca (AZN), AbbVie (ABBV) has gained verbal confirmation from Shire PLC (SHPG) to move forward with the largest non-U.S. drug merger of the year.

After five sequential bids, AbbVie's $53.7 billion offer for the Dublin-based company was approved late Monday. Led by Chief Executive Rick Gonzalez, the Chicago-based drugmaker will take the reins as long as it proves the deal logistics aren't just fancy words.

$ABBV accretive deal. hep c soon to be on the market. $70 stock. — Swingman24 (@Swingman24) Jul. 14 at 01:51 PM

Offering a 50.5% premium to Shire's market price before takeover speculation erupted four weeks ago, the deal is now only a 12% premium to Shire's closing price on Tuesday. AbbVie proposes to pay $44.71 in cash per share and swap each of the remaining Shire shares with 0.896 of an AbbVie share.

$ABBV getting destroyed. Overpaying for $shpg. $53 billion is way too much. Max pain coming — Ari Gold (@AriGold) Jul. 14 at 08:54 AM

$ABBV overpaying for $SHPG. This will not end good for Abbvie as debt load is simply astronomical on future revenues. — Ari Gold (@AriGold) Jul. 14 at 09:11 AM

With the premium in place, it is hard to believe the company isn't overpaying for the freedom to move its tax domicile, but there are a few less explicit factors adding to the deal as well. An analyst from British banking group Berenberg commented, "The company has to be of a certain size, because around 20% of the shareholders post-deal must be shareholders in the target company." The requirement ruled out quite a few of the options AbbVie could have executed on, smaller companies that cost much less, making Shire an even more lucrative target.

On the value front, according to an analyst from Bank of America Merrill Lynch, pending completion the deal will create $38 dollars per share in additional value to a combined company, which suggests AbbVie will be keeping upwards of 20% of that deal value to itself, discounting the purchase price significantly, and staying a lot of the complaining regarding the hefty premium.

The lessons taken from Pfizer extended further than just the deal team, AbbVie offered a 5% larger premium to Shire than Pfizer was willing to for AstraZenica, and also inserted "soft bids" to assure takeover discussion could be timeless. The latter may have been even more important, considering Pfizer's final bid deadlines expired on May 18 without any likely deal on the horizon. Indeed, the contrasting success and failure of AbbVie and Pfizer will be an important case for future deal talk, assuring open-ended discussions may supercede hard deadlines.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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