AbbVie forced to retract CEO comments in battle for Shire

Claims of takeover rules being broken

 

US drugmaker AbbVie has been forced to retract comments by its chief executive about shareholder support for its bid for Shire after being caught out by British takeover rules.

Chief executive Richard Gonzalez said in an interview yesterday he believed major Shire investors were “generally supportive of this transaction” – a comment he repeated in conversations with other media.

Under UK Takeover Panel rules a company attempting to acquire a rival is not allowed to claim support for its bid unless it has this in writing from shareholders.

“AbbVie confirms that it has not received any written commitments of support and accordingly retracts the statements,” it said today.

The error is a further example of the strict nature of British takeover rules, which also caused problems for Pfizer during its unsuccessful bid for AstraZeneca earlier this year.

AbbVie raised its offer for Irish headquartered Shire to £30.1 billion (€37.8 billion) yesterday, hoping to win over its reluctant target after three earlier offers were rejected.

Shire has yet to respond to the latest cash-and-stock offer, which was worth £51.15 (€64.30) a share at Monday’s prices, or 11 per cent more than AbbVie’s previous proposal. It said yesterday that its board was meeting to consider it.

Industry analysts said it was unlikely to be enough to get a deal done but it could bring Shire to the negotiating table. Several analysts have valued Shire in the mid-£50s per share or higher.

However, with AbbVie’s shares losing 3 per cent yesterday, the actual value of the latest offer has fallen to £50.19 per share, which Panmure Gordon analyst Savvas Neophytou said was inadequate and was likely to be rejected by the Shire board.

There are worries that the two sides may not manage to reach a deal, as happened with Pfizer-AstraZeneca, prompting volatility in Shire shares, which fell back sharply yesterday after initially rising on news of the raised bid.

AbbVie may have some room to offer more but it is likely to be constrained by a desire to maintain its investment grade credit rating.

The US group is eager to buy Shire both to reduce its tax bill by moving its tax base to Britain – a tactic known as inversion – and to diversify its drug portfolio by adding Shire’s specialised drugs for hyperactivity and rare diseases.

Moody’s said the latest increased offer was credit negative as it would raise AbbVie’s financial leverage, with debt-to-earnings before interest, taxes, depreciation and amortisation (Ebitda) expected to reach a range of 3.2 to 3.6 times, compared to 2.2 times at the end of March.

Shire shares were 1.3 per cent lower at £44.71 by 11;30 this morning. – Reuters