Shire Rises on Report Allergan Is Preparing Takeover Offer

Apr 29, 2014 5:34 am ET

(Updates with analyst comment in fourth paragraph.)

April 29 (Bloomberg) -- Shire Plc rose after a report that Allergan Inc. is preparing a takeover offer to fight off an unsolicited bid from Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman.

Shire climbed 3.8 percent to 3,410 pence at 10:17 a.m. in London, giving the company a market value of 20 billion pounds ($33.6 billion). The company gets about a third of its sales from medicines that treat rare diseases. Pharmaceutical companies are attracted to those so-called orphan drugs because they get exclusive marketing rights as an incentive for their development in the U.S. and Europe, while small patient populations mean fewer participants are needed for trials.

A bid by Irvine, California-based Allergan, the maker of the Botox wrinkle treatment, would add to this year’s boom in the pharmaceutical industry deals. Allergan is preparing an approach to Shire after being rebuffed earlier, Reuters reported yesterday, citing people familiar with the matter. Buying Shire, which is based in Dublin and has offices in Basingstoke, England, also would lower Allergan’s taxes.

“The merits of a possible deal between Allergan and Shire, in our view, would be based on Shire’s attractive exposure to rare diseases as well as significant cost/tax synergies,” Peter Verdult, an analyst at Citigroup Inc., wrote in a report today.

Jessica Mann, a spokeswoman for Shire, declined to comment.

Busiest Dealmaker

Valeant, the drug industry’s busiest dealmaker since 2010, last week offered to buy Allergan for $45.7 billion in stock and cash, with support from Allergan’s largest shareholder, Pershing Square Capital Management LP, the fund run by Ackman. Pfizer Inc. said yesterday it proposed buying AstraZeneca Plc for about 58.8 billion pounds ($98.8 billion) and is still interested in a deal after AstraZeneca rebuffed the bid.

Flemming Ornskov, who became Shire’s chief executive officer a year ago and is based at the company’s offices in Lexington, Massachusetts, said in an interview last year that the company was more interested in being an acquirer than an acquisition target.

Shire this year bought ViroPharma Inc. for about $4.2 billion to ease its dependence on the Vyvanse drug for attention deficit hyperactivity disorder. ADHD drugs accounted for about 40 percent of sales last year.

“As Shire’s CEO has only just completed his first year in the job, we would assume a preference for the company remaining independent,” Verdult wrote.

Shire’s stock has risen 65 percent in the past year through yesterday, outpacing the 12 percent return for the Bloomberg Europe Pharmaceutical Index, in part because of speculation the company would be acquired.