News that Shire has rejected a £27bn approach by AbbVie sent shares
in the pharmaceutical and healthcare equipment sectors higher on Friday as yet more M&A continued to give sentiment a boost.
"A bit of M&A excitement has been just the ticket to enliven trading on what may otherwise have been something of a lacklustre end to the week," said David Madden, Market Analyst at IG.
Shire's shares were up nearly 16% at 4,332p in afternoon trade after the company said it has received and rejected a 4,626p proposal from Chicago-based AbbVie, a spin-off from Abbott Laboratories.
Shire said the approach "fundamentally undervalued" the company and its prospects, assuring investors that it has a "strong independent future".
Analysts at Panmure Gordon said that they weren't surprised by the rejection with the price AbbVie being "barely adequate". The broker said that Shire's rare diseases business is one of the "hottest assets in biopharmaceuticals".
The proposal was the latest in a wave of M&A activity to hit the global pharma/healthcare industry, showing that large multinational corporations are ready and willing to use their treasure chests to finance new deals.
Recent bid talks, such as Pfizer's failed near-£70bn takeover of AstraZeneca, have also brought to light the issue of 'tax inversion' with foreign companies looking to redomicile abroad for tax purposes, raising the possibility of increased interest in UK companies.
Chief Market Analyst Michael Hewson from CMC Markets UK said: "With corporate tax rates in the UK lower than in the US, and likely to get lower, and high penalties for US companies repatriating cash, management in these companies have been looking at relocating their tax domiciles as means to save money, as well as become more profitable."
Shire admitted that this was one of the 'sticking points' in the AbbVie proposal, raising "concerns regarding the execution risks associated with the proposed inversion structure".
Smith & Nephew, the medical devices maker which itself has been the centre of bid speculation in recent months, was up 2% today. BTG, GlaxoSmithKline, AstraZeneca, Synergy Health, Vectura, Hikma and Dechra were also rising strongly.
Top performing sectors so far today
Industrial Metals & Mining 1,133.80 +2.46%
Pharmaceuticals & Biotechnology 13,254.99 +2.26%
Health Care Equipment & Services 6,023.70 +2.01%
Automobiles & Parts 8,699.94 +1.22%
Technology Hardware & Equipment 1,083.86 +0.90%
Bottom performing sectors so far today
Mobile Telecommunications 4,370.82 -0.93%
Real Estate Investment Trusts 2,695.26 -0.68%
Real Estate Investment & Services 2,615.52 -0.58%
Food & Drug Retailers 3,725.20 -0.55%
Fixed Line Telecommunications 4,475.55 -0.52%