Shire mulls new Abbvie offer

American drugs company Abbvie (ABBV) has had a whip-round and collected another £3 billion to beef up its bid for Shire Pharmaceuticals. Management at the UK blue chip is still deciding whether to meet its potential suitor, but this looks like a decent offer and Shire owes it to shareholders to at least engage in face-to-face talks.

And there's a good chance chief executive Flemming Ornskov will, having already admitted a sale will happen at the right price. He will, however, want to tease a little more from Abbvie. Less than two weeks after the US firm repeated its cash and shares offer worth 4,626p per Shire share, it has returned with a fourth and revised proposal worth a little over 5,100p - 2,244p in cash and 0.8568 Abbvie shares.

That's 11% more than last time, and, crucially, includes an extra £2 billion of cash. And Abbvie has been courting Shire shareholders for weeks now, and must have picked up an idea where it would have to pitch a bid to seal their approval. Could it be here?

Given that Shire's share price fell from a record high on the news, the market clearly thinks not, and worries that Abbvie might walk away. If it does, Shire's shares will get cheaper still. But Shire chiefs should think twice before rejecting Abbvie’s advance. Remember, the "put up or shut deadline" of 18 July is only ten days away. Shire shares are up by three-quarters since April when news broke of Pfizer's doomed approach for AstraZeneca, and by almost half since Abbvie's initial overtures.

Of course, the Americans plan to avoid US corporate tax rates and shift its tax domicile to the UK leaves a nasty taste in the mouth. And, yes, there are problems. Who wants shares in Abbvie? Certainly not Shire shareholders, most of whom would offload their stakes sharpish. An all-cash offer would be a game-changer, but that seems unlikely.

For Shire shareholders the choice is clear. Sell now near record highs, or sit it out in the hope that Shire agrees either to the new deal or something even better. At 4,530p, Shire shares trade at an 11% discount to the proposal price, worth 585p per share.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.