Following AbbVie’s £52.2 per share offer for Shire, analyst Colin Bristow wrote, “our ABBV-Shire scenario analysis indicates the deal could generate ~$3-4/share NPV for ABBV (assumes 15% SG&A/R&D synergies, combined entity tax rate at 13% per ABBV guidance).”
Bristow further commented that his analysis shows £59 per share as AbbVie’s break-even price (13 percent higher than the previous offer), meaning a higher offer is possible.
The $60 price target assume AbbVie can trade at 19 times 2014 earnings as a combined company. Bank of America justifies the higher multiple with, “strong cash flow generation, focus on shareholder return through a stable to growing dividend, expense control, and potential for positive pipeline news.”
Shares of AbbVie have dropped 0.3 percent in early Tuesday trading to $54.67.
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