AbbVie won't rule out hostile takeover of Shire

AbbVie Inc. said its $46.5 billion bid for Shire Plc offers "compelling" value for Shire shareholders and that it won't rule out going hostile in its drive to acquire the drugmaker.

Joining the companies will accelerate sales growth for both while cutting AbbVie's tax rate by almost 10 percentage points with a tax inversion, the company said in a statement Wednesday. Shire's products are "complementary" to AbbVie's, and the U.S.-based company can improve Shire's global marketing, AbbVie chief executive officer Richard Gonzalez said.

"We're not willing to restrict our legal options," Gonzalez said during a call with analysts. "We do intend to engage Shire's shareholders."

Shire is domiciled in Dublin for tax purposes with its management offices in Basingstoke, England. It also has offices in Wayne and Exton. The combined company would be managed from North Chicago, Illinois, and would have a tax domicile in the U.K., AbbVie said in its statement. With a deal, AbbVie's tax rate would drop to 13 percent from about 22 percent last year, the company said.

To make a firm offer, AbbVie would want unanimous support from Shire's board, according to the U.S. company's statement.

AbbVie also addressed Shire's criticism that its plan to move out of the U.S. for tax purposes is risky, saying it "believes the proposed transaction is highly executable."

Shire responded in a statement that its shareholders should take no action.

"Today's announcement by AbbVie contains no new proposal and provides no material new information," the drugmaker said in the statement. "The board of Shire has already considered this proposal in detail and unanimously rejected it, concluding that it fundamentally undervalued the company and its prospects."

Under U.K. takeover rules, AbbVie has until July 18 to make a firm offer or walk away. If it walks away, it's precluded in most cases from making another bid for as long as six months.

Shire is listed on the London Stock Exchange, but its American depository receipts are traded on the NASDAQ and they rose $7.87 to close at $231.14. AbbVie rose $1.41 to close at $55.

AbbVie's bid for Shire is the latest cross-border deal proposed by a U.S. company seeking lower taxes and the freedom to spend its overseas cash. On June 15, Medtronic Inc. agreed to buy Dublin-based Covidien Plc, a medical equipment firm. Pfizer Inc. also bid $117 billion for London-based AstraZeneca Plc - and was rejected - in what would have been the largest deal in drug industry history.

"Tax inversion is a pretty explicit motivation," Ronny Gal, a New-York based analyst at Sanford C. Bernstein & Co., said in an interview of the strategy to acquire a company in a country with a lower corporate tax rate. "If enough of these transactions take place, Congress would act. It's unlikely this will happen before the election. However, if it looks like jobs will begin to be lost in the U.S., you could see more action." Gal added, "Notice that AbbVie said operational headquarters stay in Chicago, so they're saying jobs won't be lost, but they don't want to pay U.S. taxes."

Gonzalez's decision not to rule out a hostile bid also differs from Pfizer's strategy. Pfizer later said it wouldn't go hostile in its bid for AstraZeneca.