The Battle For Shire PLC

Shire (LSE: SHP) (NASDAQ:SHPG.US) has been the subject of bid speculation for some time now. So it came as no surprise when the company revealed today that it was in takeover talks with US drug maker AbbVie Inc

AbbVie makes the rheumatoid arthritis drug Humira, and a deal between the two companies would create a world leading specialist in rare disease treatments.

However, the two companies have been in talks for some time now, but there has been no agreement so far. What’s more, there is no guarantee the discussions will lead to a transaction.

Plenty of suitors 

shireNevertheless, it is also possible that other suitors will emerge for Shire. Indeed, during the last few weeks rumours have been flying around the City that another US biotech giant, Allergan, will pounce on the company.

Allergan is one of the world’s leading Botox makers and the company is currently trying to fight off a hostile bid from peer Valeant.

It is thought that if Valeant were to successfully acquire Allergan, Allergan would be torn to pieces and sold off to make a quick buck. So, to protect stakeholders, Allergan is weighing up deals to effectively buy its way out of the deal.  

Shareholders will benefit

A deal between Shire and Allergan would actually be great news for the shareholders of both companies.

You see, the management teams at Shire and Allergan are considered to be the best in the business — and the share prices of both companies stand testament to this. Over the past five years, Shire and Allergen have seen their share prices surge 350% and 250% respectively.

Further, a deal would mean that the combined company would have leading market shares in aesthetics, ophthalmology, and orphan/rare diseases.

Initial estimates did suggest that Allergan could offer up to $41bn (£24bn) for Shire, but after recent gains Shire is now worth a lot more.

Plans of its own

While suitors are circling Shire, the company has plans of its own. There is talk that Shire could pay up to $4bn in cash for US-based NPS pharma. Shire has recently inked a deal with Citigroup, which will see the bank provide a war chest of $5bn to the company.

Once again, a deal between Shire and NPS would be a boon for the company’s shareholders. NPS’s lead product, Gattex — designed for the treatment of short bowel syndrome — fits across both Shire’s rare disease and gastrointestinal platforms. A merger of the two companies would accelerate Shire’s plans to expand within the rare disease treatment market.

Back in the real world

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Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in Shire.