Shareholders of the biopharmaceutical company
(ticker: ABBV) won’t be allowed to vote on company’s proposed $63 billion acquisition of
(AGN), news of which had sent AbbVie stock down 15.3% by midday Tuesday.
AbbVie shareholders will have no say in the deal, which will reshape the company as it integrates the maker of Botox into its operations. AbbVie didn’t respond to a request for comment.
Shareholders of Allergan will vote on the sale, but the transaction will likely face little opposition from them. Allergan stock soared 26.7% on Tuesday.
The proposed acquisition has been structured in a way that allows the deal to slip under the threshold at which a shareholder vote would have been required. The rules of the New York Stock Exchange, where both companies are listed, say a company needs shareholder approval to increase its number of shares outstanding by 20% or more.
Under the terms of the deal as described in AbbVie’s news release, AbbVie will issue roughly 283 million shares to Allergan shareholders, equivalent to 19.2% of AbbVie’s current number of shares outstanding. That’s less than 1 percentage point shy of the level that would trigger a shareholder vote.
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Analysts have called the AbbVie deal a major win for Allergan, but an unexpected move for AbbVie.
In a note on Tuesday, Piper Jaffray analyst David Amsellem said the acquisition was a “lifeline to end all lifelines” for Allergan. But, he writes, the AbbVie end of the deal is a “mixed bag.”
Allergan’s marquee drug, Botox, which accounted for 24.1% of its total net revenues for the first quarter of this year, is facing increased competition. Meanwhile, another Allergan offering, Restasis, is losing its patent protection.
Some analysts said AbbVie was potentially overpaying for Allergan. “An expensive price for a questionable asset,” Amsellem wrote.
Still, AbbVie had limited choices, as its own marquee drug, Humira, is approaching the end of its patent protection in the U.S. in 2023.
“The acquisition of Allergan represents a rare and unique opportunity for AbbVie to accelerate the progress of the growth platform by adding highly valuable on-market assets with leadership positions across attractive growth segments,” AbbVie chairman and CEO Richard Gonzalez said on a conference call with analysts on Tuesday morning. He said the combination of the two companies would bring value to shareholders.
So far on Tuesday, AbbVie shareholders were voting by exiting their positions. By midday, the selloff had cost the company $6.1 billion in market capitalization.
Write to Josh Nathan-Kazis at firstname.lastname@example.org