Shire PLC Accepts £32bn Takeover By AbbVie Inc

shireAs expected in most corners of the market, Shire (LSE: SHP) has accepted AbbVie‘s (NYSE: ABBV.US) takeover bid of around £32bn, as the shares reached a historical high of over 4,950p in morning trade.

The successful bid represents a premium of 53% against the £34.67 price of Shire shares on 2 May (the last business day prior to AbbVie’s initial proposal).

For each share they held in Shire, investors will receive a cash consideration of £24.44 as well as 0.8960 new AbbVie shares, equating to a value of £52.48 per Shire share based on AbbVie’s closing share price of $53.52 on 17 July, or £53.19 per Shire share based on AbbVie’s 30-day volume-weighted average price of $54.83 to 17 July 2014.

Management at AbbVie claimed that the joining of the two companies “will create a well-positioned and focused specialty biopharmaceutical company, with sustainable leadership positions within areas of unmet need, including immunology, rare diseases, neuroscience, metabolic diseases and liver disease (HCV) and multiple emerging oncology programs”.

Shire shareholders who may not be too familiar with AbbVie’s practices may be reassured by the latter’s commitment to growing a strong dividend, following Shire’s long track record of delivering shareholder value. Additionally, Chairman of the Board and Chief Executive Officer of AbbVie Richard A. Gonzalez commented:

“The combination of AbbVie and Shire is attractive for shareholders of both companies, bringing the potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced cash returns to shareholders. The combination would provide us with enhanced access to cash that we can use to expand our portfolio and fund M&A to supplement organic growth.”

Shire’s chairman, Susan Kilsby, said:

We believe that this offer reflects the substantial value that we have already created for Shire’s shareholders and the strength of our future prospects. We believe that the combined group represents an exciting fit of two complementary businesses that will create a new market leader in specialty pharmaceuticals with a portfolio of fast growing products, a promising pipeline and enhanced growth prospects.”

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Sam Robson owns shares in GlaxoSmithKline.