Shire finds AbbVie's new offer irresistible

Shire has finally caved in and held face-to-face talks with US suitor AbbVie (ABBV), something we urged it to do last week when the Americans increased their offer for a fourth time. It owned up in a statement rushed out late Friday after the stockmarket had closed. Clearly, talks went well - the UK-listed drug giant has today received an even better offer, now worth £31 billion, or 5,320p per share.

"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," said Shire on Monday.

"Accordingly, the board is in detailed discussions with AbbVie in relation to these terms."

Just days after we said there was a good chance of a deal, and that chief executive Flemming Ornskov would want to "tease a little more from AbbVie," the Americans have increased the cash element of their offer to 2,444p plus 0.896 AbbVie shares. Its previous proposal - worth about 5,100p - included 2,244p of cash and 0.8568 AbbVie shares.

A sceptical City, previously reluctant to price in success, chased the shares above 5,000p, putting them on 26 times even the most optimistic analysts' earnings per share forecast for 2014. It's 28 times if you use Panmure Gordon's estimate of 314 cents for this year.

That's the kind of multiple at which a deal can be done.

AbbVie has until the "put up or shut up" deadline on Friday to thrash out a deal.

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