Shire Braces For Takeover

Shire enlists the help of investment bank Citi for advice on possible takeover offers

British based drug-maker Shire have enlisted the help of investment bank Citi to offer advice, as they are expecting imminent takeover approaches. The move has been taken by Shire following several other deals being done in the healthcare sector.

The rumours of potential takeovers have been fuelled by the big U.S. companies looking to see lower tax rates abroad. Shires’s tax base is located in Ireland, where corporation tax is amongst the lowest in the world. Shire has a market value of around $35 billion making them a prime target according to analysts and bankers.

Shire specialise in treatments for ADHD and a range of rare diseases and was founded in Britain in 1986 however they conduct most of their business in the U.S.. In 2008 they domiciled in Ireland for tax purposes.

Shire has already had a tentative approach this year from botox maker Allergen however the U.S. group became a takeover target itself with Valeant looking to acquire them. Allergens approach did not lead to anything serious with discussions never taking part between themselves and Shire and no future talks scheduled either.

Shire is a bit of an anomaly in being a mid sized drug-maker with no controlling shareholder although this also means that there is constant talk of takeover approaches for the company. Sector bankers believe that Shire would be particularly appealing to U.S. pharmaceutical and biotech firms such as Bristol-Myers Squibb, Amgen, Abbvie, Gilead and Biogen.

ADHD sales makes up around 40% of Shire’s sales. The drug-maker also sells pricey drugs to treat rare genetic disorder and is currently building up a healthy portfolio of treatments in ophthalmology and other speciality disease areas.

The current imperative for major drug-makers to keep up with rivals in terms of a low tax rate and to use offshore cash that would otherwise be taxed punitively if brought back home, could now be changing the calculation, some industry watchers believe.

The rise of the inversion deal

There has been a huge amount of these so called inversion deals and this was represented at the weekend when U.S. medical device maker Medtronic agreed to buy Coviden for just under $43 billion, so they could move its base to Ireland.

Ireland is an attractive destination for U.S. companies since it offers 12.5% corporation tax compared to the U.S. which has a rate of 35%. A review showed that there had been 50 of these inversion deals in the past 25 years however over half had occurred since the financial meltdown between 2008 and 2009.

There is a minority of United States lawmakers who are concerned that the inversion deals are eroding government revenue by giving corporations a tax avoiding loophole. Two bills in the U.S. congress and a White House proposal would make inversion deals harder to do however neither gained much support. This could all change though if a few more major U.S. companies try to conduct inversions.

Pfizer had an $118 million bid for British drug-maker AstraZeneca rejected earlier this year, which scuppered what would have been the largest of these inversion deals. There is much speculation though that this deal is still breathing and maybe revived. Under British takeover law, the UK firm can approach Pfizer at the end of August to discuss a sweetened bid, or Pfizer can try again in November.

Alex Carson

PiR Resourcing leaders in senior life science resourcing. For more news and information, you can follow us on Twitter and LinkedIn  For all our latest roles in the Life Science sector please click here.

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