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Shire in talks over renewed buyout bid

Drug maker AbbVie increases offer to $53.6b

Lexington biotech Shire plc, which turned away three previous buyout bids from AbbVie Inc., acknowledged Monday its executives were engaged in takeover talks after the drug maker sweetened its offer by $2.6 billion to $53.6 billion.

The deal would be the third-biggest acquisition ever of a Massachusetts company, surpassing Medtronic Inc.’s pending $42.9 billion purchase of Mansfield health care supplier Covidien plc, which was unveiled last month. It would also be the largest in a recent string of “tax inversion” transactions in which US companies seek to boost profits by changing their addresses through acquisitions in countries with lower corporate tax rates.

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Shire, like Covidien, has its chief executive in Massachusetts but the companies’ corporate headquarters are in Ireland. Shire has about 1,500 workers in Massachusetts and just 100 in Ireland, where the corporate tax rate is 12.5 percent, compared with 35 percent in the United States.

The companies have not addressed what would happen to Shire’s campus in Lexington, where it has its largest research and development labs and makes drugs to treat rare genetic disorders such as Gaucher and Fabry diseases, if AbbVie were to acquire Shire.

In an interview with the Globe last month, Shire chief executive Flemming Ornskov said, “Massachusetts is essential to Shire. Massachusetts and Lexington are at the heart of our biotech strategy, and that’s what’s generating a significant part of our growth.”

Ornskov also said “business is humming along” at Shire despite the “distraction” of the bids by AbbVie, which is based in North Chicago. “I think there is a very strong future for Shire as an independent company,” he said.

But when AbbVie raised its offer Monday, Shire issued a statement indicating its board “would be willing to recommend” shareholders accept the latest bid if detailed discussions related to unspecified other terms are concluded successfully. But the Shire statement cautioned, “There can be no certainty that any firm offer will be made.”

Representatives of Shire and AbbVie declined to discuss their talks Monday.

Biopharma industry watchers, however, said a takeover appears probable. “It is pleasing to see the two boards working well together, and the proposed offer seems a fair price that represents good value for both companies’ shareholders,” said Mick Cooper, analyst at Edison Investment Research, a market research firm based in London.

Larry Harding, executive director for corporate development at Radius, a Boston firm that helps US companies expand overseas, said AbbVie — which was formed through a spinoff of the drug business of Abbott Laboratories Inc. — appears interested in Shire’s rare-diseases drug portfolio, which is “largely complementary” to AbbVie’s roster of arthritis drugs and other medicines. But the tax advantages of a move to Ireland also figure in the bid, he said.

“Operationally, this makes sense,” Harding said. “And that’s 90 percent of the deal. But the other 10 percent is the tax benefits of the inversion, and that carries it over the finish line.”

He said AbbVie, which has a plant in Worcester but no major presence in the Boston area, would be inclined to keep much of the Lexington operation intact, but not all of it. “Any time you have an acquisition,” he said, “the acquirer calls the shots and they’re likely to move some jobs closer to their home operations.”

Carol Levenson, research director for Gimme Credit, a New York firm that analyzes corporate bonds, said AbbVie is financially flexible but can be expected to borrow billions of dollars to complete a deal for Shire. Taking on such a debt load “places its credit profile in additional jeopardy,” Levenson warned in a research note.

If a deal is completed, it would be the third largest in state history, behind the $58.6 billion sale of Gillette to Procter & Gamble in 2005 and Bank of America’s $53.7 billion purchase of FleetBoston in 2004.

Shares of Shire climbed $5.21, or 2.1 percent, to $24.50 Monday. AbbVie’s shares slipped 11 cents to $54.85.

Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.
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