U.S. drugmaker AbbVie bought Dublin-based Shire in a $54.7 billion deal that will allow it to slash its tax bill by relocating across the pond.
The London-listed company, which makes expensive medicines to treat rare diseases, fought off four earlier bids from AbbVie until the Chicago-based firm raised its price to $88.28 a share — made up of $41.11 in cash and 0.8960 new AbbVie shares.
AbbVie is buying Shire to cut both its U.S. tax bill and its reliance on arthritis drug Humira, the world’s top selling medicine which loses its U.S. patent in 2016. AbbVie, which generates nearly 60 percent of its revenue from the aforementioned drug, had until July 18 to announce a firm offer for Shire, extend the deadline or walk away under UK takeover rules.
It now plans to create a company listed in New York, incorporated in New Jersey, the Channel Islands, and tax-domiciled in the UK, which will pay a tax of about 13 percent by 2016, sharply lower than its current rate of about 22 percent, making the deal on of the biggest driven by tax inversion.
Dick Durbin, D-IL in the US Senate, criticized AbbVie for moving after using taxpayer-supported medical research to become one of the United States’ most profitable companies.
“It was our government’s patent office which protected their discoveries and guarded their right to make a profit. Now AbbVie is ‘moving’ to an Irish island to escape paying the U.S. taxes it owes.
Richard Gonzalez, AbbVie Chairman and CEO:
“Companies like ours need access to our global cash flows to be able to make investments all around the world, but specifically to be able to make investments in the United States, and today we’re at a disadvantage versus many of our foreign competitors.”
Shire Chief Executive Officer Flemming Ornskov, whose tenure was marked by earnings upgrade after earnings upgrade, will stay on, initially to help with integration and then to head a dedicated rare disease division.
Separately, Shire raised its full-year earnings guidance to low-to-mid 30 percent growth, from mid-to-high 20 percent growth. The company reported record revenue of $1.5 billion for its second quarter and a 42 percent jump in its preferred earnings measure of non-GAAP adjusted earnings per ADS to $2.67.
Shire was advised by Goldman Sachs, Morgan Stanley, Deutsche Bank, Evercore and Ciit, while AbbVie was advised by J.P. Morgan.