Jefferies believes US tax reforms could be the catalyst for a bid for Shire (LON:SHP), Citywire reports. The comments came as the analysts retained their bullish recommendation on the London-listed rare disease specialist.
Shire’s share price has been subdued in London in today’s session, having given up 0.66 percent to 3,838.00p as of 09:37 GMT. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index having climbed marginally higher and currently standing 0.05 percent up at 7,528.76 points.
Jefferies bullish on Shire
Jefferies reiterated its ‘buy’ rating on Shire yesterday, while trimming its price target on the shares from 5,250p to 4,900p, with the broker’s analyst David Steinberg referencing reports that US and European names were circling the rare disease specialist. The move is a boost for Shire after Liberum abandoned its bullish stance on the company this week, arguing that the risk/reward ratio was now more balanced.
US tax reform impact
Citywire quoted the analyst as explaining that in Jefferies view, “the US tax reform legislation – which includes far lower US corporate tax rates and access to ex-US cash via repatriation – could drive a mergers and acquisitions reacceleration in the broader healthcare arena”.
“This dynamic could potentially result in another bid for Shire,” Steinberg, adding, however, that the broker thought that “the potential group of buyers to be very limited”.
Any potential bid for Shire will come after the pharmco was nearly acquired by US drugmaker AbbVie back in 2014, with the merger collapsing following a move by the administration of former US President Barrack Obama to clamp down on tax inversion deals. Tax considerations were one of the reasons for AbbVie’s interest in Shire at the time with the US group having expected the tie-up to reduce the combined company’s effective tax rate to approximately 13 percent from 22 percent.