How Will AbbVie (ABBV) Stock React To Merger With Shire Pharmaceuticals (SHPG)

NEW YORK (TheStreet) --  AbbVie (ABBV) has finalized a deal to buy Shire Pharmaceuticals (SHPG) in a $54 billion tax inversion merger on Friday.

The deal was consummated after months of negotiations and shifts Abbvie's tax burden across the pond to the less restrictive U.K.

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Shire shareholders will receive $91.07 for each of their shares as part of the merger and will control about 25% of the new company.

AbbVie shares are down -1% to $53.03 in pre-market trading today.

TheStreet Ratings team rates ABBVIE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ABBVIE INC (ABBV) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to other companies in the Pharmaceuticals industry and the overall market, ABBVIE INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The revenue growth came in higher than the industry average of 5.6%. Since the same quarter one year prior, revenues slightly increased by 5.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Pharmaceuticals industry average. The net income increased by 1.2% when compared to the same quarter one year prior, going from $968.00 million to $980.00 million.
  • The debt-to-equity ratio is very high at 3.07 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, ABBV has managed to keep a strong quick ratio of 2.20, which demonstrates the ability to cover short-term cash needs.
  • Net operating cash flow has decreased to $624.00 million or 47.43% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: ABBV Ratings Report
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