The stock market rumour mill is in full swing today. Versus speculation that BT (BT.A) could get taken over by its German rival Deutsche Telekom (DTEGN:DE), threats on new banking levies and Diageo's (DGE) own buyout whispers, talk that FTSE 100 niche drug-maker Shire (SHP) might be making its own takeover moves are being roundly shrugged-off by investors. The shares are down 2% today at £53.45.
The story goes that Swiss outfit Actelion (ACT:SIX) has caught the UK rare disease specialist's eye, and has already had a £12 billion bid rejected, although both companies are staying mum for now.
‘We don’t comment on speculation, which is what this is,' a Shire spokesperson told Shares today.
Shire has apparently been sweet on the hyperactivity drugs manufacturer for weeks, allegedly making a CHF160 per share, or about £112.00, offer some weeks back.
If the reports are true, and Shire comes back with an improved bid, it would be the company's largest deal in an expansive acquisition strategy. The fact that Actelion stock jumped nearly 9% to CHF143.6 suggests that there may be something in the rumours.
Analysts at German bank Berenberg value Actelion at CHF135 per share, but believe Shire’s offer is ‘justified’ assuming that with the acquirer cutting costs the valuation increases to CHF162 a share.
‘However, as the offer was rejected, a serious offer could come at a more substantial premium of between CHF180 to CHF200 per share,’ they warned.
Shire is working to generate $10 billion in annual sales in the next five years. Revenues are expected to top $6.2 billion this year, according to Panmure Gordon, rising to $7.4 billion in 2016.
Shire is one of several larger drug companies that are using their huge cash piles and low borrowing rates to replace revenues lost to generic competition as exclusivity protections have expired in recent years.
The Dublin-based drug giant’s war chest has been swelled by US player AbbVie (ABBV:NYSE) paying a £1 billion break-up fee after pulling the plug on its £32 billion takeover in October.
Growth is not only about acquisitions. It also has an organic strategy with more than 60 drugs in its pipeline.
Shire’s research bill topped $840.2 million last year, a fraction of its acquisition costs. Directors are under pressure to boost profits quickly and buying market share speeds up the process.