Shire Rises on SunTrust Report of Imminent Allergan Bid

Shire Plc rose a third consecutive day after an analyst said Allergan Inc. plans to bid for the Anglo-Irish drugmaker as the U.S. competitor seeks to prevent a hostile takeover by Valeant Pharmaceuticals International Inc.

Shire climbed 3.4 percent to close at a record 3,785 pence in London, valuing the company at 22.3 billion pounds ($37.8 billion). The company’s corporate domicile is in Dublin and its principal executive offices are in Basingstoke, England.

Buying Shire would enable Irvine, California-based Allergan to diversify into drugs for rare diseases and would provide a lower corporate tax rate, John Boris, an analyst at SunTrust Robinson Humphrey in New York, said in a report today. Allergan makes the Botox wrinkle treatment. Shire produces medicines for attention deficit hyperactivity disorder and for rare illnesses.

“We believe an AGN bid for SHPG is imminent,” Boris wrote, without specifying a reason. Such a deal “makes strategic sense.” Boris didn’t return calls asking for comment.

Spokeswomen at Allergan and Shire both declined to comment.

The only area of overlap between Allergan and Shire is in treatments for eye diseases, said Mark Clark, an analyst at Deutsche Bank AG in London. Allergan markets treatments for dry eye, glaucoma and external eye diseases, while Shire said last month it plans to apply for U.S. regulatory approval of its lifitegrast dry eye treatment.

Industrial Logic?

“If lifitegrast doesn’t make it to the market, there is next-to-zero industrial logic in Allergan acquiring Shire as they operate in very different fields,” Clark said by phone. “It would have to be largely tax-motivated.”

Shire is among a few companies that Allergan could acquire, such as Alkermes Plc, which is domiciled in Ireland and would also have a lower tax rate, said Vamil Divan, an analyst with Credit Suisse in New York. He said he doesn’t expect a deal is imminent.

Shire’s stock has been trading at record highs since late last year. The shares jumped as much as 6.2 percent on April 29 after Reuters reported that Allergan planned a bid, though they ended the day lower.

Allergan rose 1.2 percent to $162.41 at 4 p.m. in New York.

Valeant, Canada’s largest drugmaker, today began a $54 billion cash-and-stock tender offer for Allergan, the Laval, Quebec-based company said in a statement. Valeant has teamed up with Pershing Square Capital Management LP, the hedge fund run by investor Bill Ackman that owns 9.7 percent of Allergan.

“The fact that Allergan’s largest shareholder is agitating for a Valeant takeover strongly suggests it would not support a spoiling move by Allergan,” Clark said. “I wouldn’t hold my breath.”

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