DealBook: Shire and AbbVie 1n Talks 0ver $53 Billion Pharmaceutical Merger

LONDON – The Irish drug maker Shire said on Monday that its board of directors was prepared to recommend an improved takeover bid that it received over the weekend from AbbVie, pending further discussions, paving the way for a merger.

In its latest offer, AbbVie, based in Chicago, has offered to pay cash and stock equal to about 53.20 pounds a share for Shire. That is the equivalent of roughly £31 billion, or about $53 billion.

AbbVie, the maker of the arthritis drug Humira, had previously offered to pay about $51 billion for Shire, which makes Vyvanse and Adderall XR, treatments for attention deficit hyperactivity disorder.

The deal, if completed, would allow AbbVie to reincorporate in Britain and save millions of dollars in taxes, a process known as an inversion. Shire has its headquarters in Ireland and is listed in London.

"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," Shire said in a statement on Monday. "The board is in detailed discussions with AbbVie in relation to these terms."

AbbVie is hoping to reach a deal before July 18, when it will have to make a firm offer or walk away for up to six months under British takeover rules.

Officials from the two drug makers met in New York on Friday to discuss a tie-up after Shire had rejected several previous approaches from AbbVie. The latest offer is the fifth revised bid by AbbVie.

Under the proposal, AbbVie would pay £24.44 in cash and 0.896 shares of the combined company. Shire shareholders would own about 25 percent of the combined company.

The latest offer represents a particularly rich premium — 53 percent over Shire's closing price of £34.67 a share on May 2, the day before AbbVie's first approach.

Shares of Shire traded up 2.5 percent to £49.99.

AbbVie has aggressively pursued Shire since making its interest known publicly in late June.

The American drug maker and its financial adviser, JPMorgan Chase, have had a series of meetings with Shire's shareholders, including a trip to London by Richard A. Gonzalez, AbbVie's chairman and chief executive.

The company had to backtrack from statements that Shire shareholders were supportive of the potential tie-up last week after it fell foul of British takeover rules.

In late June, Shire argued that as an independent company it could more than double its revenue in the next seven years, to about $10 billion. The company said it expected double-digit sales growth each year from its current drug portfolio.

Shire has said it expects $7 billion in annual revenue from its current products and another $3 billion from its existing pipeline by 2020.

In the last year, Shire has reshaped its strategy and business, in part by focusing on highly lucrative drugs to treat rare diseases, an area that has become increasingly attractive to big pharmaceutical companies.

In November, Shire agreed to acquire ViroPharma, a Pennsylvania-based biopharmaceutical company focused on rare diseases, for $4.2 billion.

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