Merger Monday: The AbbVie/Shire Saga Continues

AbbVie CEO Richard Gonzalez is taking his case directly to Shire's shareholders.

Jun 30, 2014 at 10:15AM

As we begin an abbreviated trading week due to the Independence Day holiday, U.S stocks are little changed on Monday morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) up 0.14% and 0.08%, respectively, at 10:15 a.m. EDT. In contrast to the lack of volatility in the stock market, the mergers and acquisitions arena has picked up dramatically this year, with the Financial Times reporting that the value of global M&A rose 75% year on year in the first half of 2014, to $1.75 trillion -- the highest volume since 2007. The total value announced in the U.S. is also up by three-quarters over the same period last year. This comes as no surprise to someone who comments on the financial headlines every day, and no sector has seemingly been more active than health care -- as an example, take the latest development in the contest that pits U.S. biopharma AbbVie (NYSE:ABBV) against Shire (NASDAQ:SHPG).


Source: Wikipedia.

Here's where we stand so far: Ten days ago, AbbVie, which was spun off from Abbott Laboratories last year, announced that it had approached U.K.-listed Shire with a cash-and-share merger proposal that it sweetened twice, with the "final" offer worth GBP 46.26 per share. Under the British City Code on Takeovers and Mergers, the announcement leaves AbbVie until July 18 to make a formal bid or withdraw for a minimum six-month cooling-off period.

Shire's attraction for AbbVie is twofold: First: growth. AbbVie's Humira rheumatoid arthritis drug, which accounts for 60% of company revenue, is going off-patent in at the end of 2016. Second: taxes. AbbVie said it will move its tax domicile to the U.K. if it is successful in acquiring Shire, implementing a so-called "tax inversion." The inversion would produce multiple tax advantages on multiple levels (readers will recall this was one of the driving factors behind Pfizer's failed GBP 69 billion bid for AstraZeneca).

Properly motivated, AbbVie is taking its case directly to Shire's shareholders this week, with CEO Richard Gonzalez crossing the pond to deliver his pitch in London. Gonzalez will argue that (among other things) AbbVie provides the platform to immediately take Shire's rare diseases franchise to the next level.

Shire is not remaining placid. Combative CEO Flemming Ornskov has countered with the prospect of a stand-alone Shire doubling its sales by 2020. Nonetheless, Ornskov claims he is agnostic regarding a takeover and is working for his shareholders, asserting that "you should look at my record. I'm all about shareholder values and returns. I'm in no way intransigent, but that decision is made by the board of directors."

If that is the case -- and I hope it is -- Shire's refusals is simply smart bargaining. I suspect AbbVie is willing to go higher with its offer to cinch this deal. Shire is in play and, without the same political support as AstraZeneca, it would be surprising if it remains independent (even if Shire isn't the ultimate acquirer) -- a better price is in the offing.

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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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