U.S. markets closed
  • S&P 500

    3,298.46
    +51.87 (+1.60%)
     
  • Dow 30

    27,173.96
    +358.56 (+1.34%)
     
  • Nasdaq

    10,913.56
    +241.26 (+2.26%)
     
  • Russell 2000

    1,474.91
    +23.09 (+1.59%)
     
  • Crude Oil

    40.04
    -0.27 (-0.67%)
     
  • Gold

    1,864.30
    -12.60 (-0.67%)
     
  • Silver

    22.99
    -0.21 (-0.91%)
     
  • EUR/USD

    1.1637
    -0.0038 (-0.33%)
     
  • 10-Yr Bond

    0.6590
    -0.0070 (-1.05%)
     
  • GBP/USD

    1.2744
    -0.0008 (-0.06%)
     
  • USD/JPY

    105.5000
    +0.0980 (+0.09%)
     
  • BTC-USD

    10,788.71
    +53.35 (+0.50%)
     
  • CMC Crypto 200

    230.19
    +12.36 (+5.67%)
     
  • FTSE 100

    5,842.67
    +19.89 (+0.34%)
     
  • Nikkei 225

    23,204.62
    +116.82 (+0.51%)
     

The Pharmacyclics–AbbVie Merger: What Are the Details?

Brent Nyitray, CFA, MBA

The Pharmacyclics–AbbVie Merger: The Risks and the Rewards (Part 2 of 12)

(Continued from Part 1)

Basics of the transaction

The Pharmacyclics–AbbVie merger transaction is a tender offer involving a cash and stock election. This allows the investor to choose the consideration he or she receives subject to limits and proration. Elections can be a good way to gain some excess return by catching people napping.

Terms of the transaction

In the Pharmacyclics–AbbVie merger, Pharmacyclics, Inc. (PCYC) shareholders will receive $261.25 per share once the deal closes. They’ll maintain exposure to AbbVie Inc. (ABBV) after the transaction closes. The companies are guiding for a second quarter 2015 close.

Conditions precedent

The following conditions need to be satisfied in order for the deal to close:

  • minimum tender condition (50%)

  • Hart-Scott-Rodino antitrust filing

  • any other government approvals

Nonsolicitation

Pharmacyclics has a nonsolicitation agreement with a fiduciary out. This means that prior to shareholder approval of the transaction, Pharmacyclics could discuss another merger if approached by another suitor.

First, the Pharmacyclic board of directors would have to determine that such discussions could lead to a bona fide offer that would likely result in a higher bid for the company. Salix, however, is not permitted to shop itself around.

Breakup fee

In the event another bidder comes in and tops the AbbVie bid, it will owe a breakup fee of $680 million.

Financing

AbbVie warrants that it has commitment letters for financing the cash portion of the transaction.

Other merger arbitrage resources

Other important merger spreads include the deal between Hospira (HSP) and Pfizer (PFE). For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the healthcare sector should look at the Health Care Select Sector SPDR Fund (XLV).

Continue to Part 3

Browse this series on Market Realist: