Shire/AbbVie has much to discuss ahead of 18 July deadline
There is still “a lot left” to be negotiated about a firm offer for Shire [LON:SHP] from AbbVie [NYSE:ABBV] ahead of the expiration of the latter’s put-up-or-shut-up period under the UK takeover code, said a source close to the situation.
Shire has said that it is willing to recommend AbbVie’s new offer valued at GBP 53.20, subject to successful negotiation of other terms of the offer. These will include break fees and management positions, said a second source close to the deal.
AbbVie has until 5:00 pm on 18 July to make a firm offer for Shire before it has to walk away for six months. The deadline can be extended upon a request by Shire.
Shire could easily ask for an extension if it needs to, a sector banker said. There could be contentious issues to be worked out, such as whether AbbVie can walk away from the deal in the event of changes in tax inversion rules, the banker said.
A second sector banker said Shire has managed to get AbbVie to a good price from its initial offer to engage in merger negotiations. “We are already at a highly recommendable offer for shareholders, though,” he added.
“Shire may be absolutely giving them no way out. It will want this to be ironclad,” said the first sector banker.
US Treasury Secretary Jack Lew wrote a letter to the congressional tax-writing committees on 15 July, asking them to enact changes to tax law that allow companies to invert, including backdating inversions from May 2014. The same banker dismissed the letter but acknowledged that potential changes in tax inversion law could be an issue for AbbVie. A third sector banker said that based on his conversations with his clients and tax experts in the space, a change in tax rules is not expected this year, but Shire may want to have a safeguard against it in the merger agreement.
Other issues could include board composition, any potential break fees, and the timing of the offer, said the first banker. Oftentimes, it is “softer issues” such as the position of the senior management, employees, and research facilities that could undermine deals more than value, he said.
The new proposal comprises GBP 24.44 in cash and 0.8960 AbbVie shares per Shire share. Shire shareholders would end up owning approximately 25% of the combined company.
AbbVie declined to comment. Shire did not immediately respond to a request for comment.