AbbVie and Shire agree that $54 billion is a fair price
After haggling for nearly three months, Shire has finally agreed to accept an offer from AbbVie. In a cash and stock deal worth a reported $54 billion, AbbVie will gain Shire's orphan drug portfolio, its blockbuster attention deficit disorder drug Vyvanse, and perhaps most importantly, an Irish address.
The deal will cut AbbVie's effective tax rate roughly in half and will create a company with combined revenues expected to exceed $25 billion next year. Shire's shareholders will own approximately 25% of the new company, which might have been an important factor in closing this deal.
As I discussed earlier, Shire's shareholders had little to gain by merging with AbbVie, whereas AbbVie had a number of good reasons to vigorously pursue this particular deal. By making a portion of the offer stock-based, the merger now looks far more promising for Shire's shareholders than an all cash deal would have been, in my opinion.
Overall, I think this merger will create a highly diversified pharma company with a compelling product portfolio worth keeping tabs on moving forward.
Shire posts record sales growth in the second quarter
On another positive note, Shire reported record high sales growth for the second quarter today. Specifically, product sales grew by 22% year over year to $1.47 billion in the second quarter. Total revenues came in at $1.502 billion, an increase of 20% compared to the same period a year ago.
Management noted that about 12% of this revenue growth came from rare disease products obtained in its acquisition of ViroPharma earlier this year, especially Cinryze.
Shire's main revenue driver Vyvanse again posted strong sales growth, up 20% to $360 million, year over year. Replagal and Firazyr also generated stellar top-line growth for the company, with sales climbing 14% and 80% for the year, respectively. As a result, Shire is upping its revenue guidance to low to mid 30% growth, compared to the mid to high 20% growth previously announced.
Gentiva receives alternative bid offer, shares push higher
Shares of the home health and hospice company Gentiva Health Services shot up over 10% in after hours trading yesterday following a report that the company received an alternative bid offer that is significantly higher than the one being floated by Kindred Healthcare (NYSE:KND) .
Although Gentiva declined to name the bidder, they did state that the offer was $17.25 per share, amounting to approximately $644 million in an all cash deal. Gentiva has twice rebuked takeover overtures from Kindred, stating that their proposed offer significantly undervalues the company and is not in the best interest of its shareholders. The last offer from Kindred stood at $16.00 a share.
Kindred is reportedly buying up to 14.9% of Gentiva in an attempt to force the company into a merger -- a move Gentiva's management called "coercive". In sum, it looks like Gentiva may not remain independent much longer, so the big question may be how much the company will end up selling for in the end.