Should Shareholders Heed Shire PLC (NASDAQ:SHPG)’s Advice?

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Shire PLC (NASDAQ:SHPG) has learnt that an investor called TRC Capital Corporation is seeking to acquire as many as 1 million of its American Depositary Shares (ADSs). TRC Capital is trying to acquire the shares through a mini-tender offer. However, Shire is not happy with what TRC Capital is trying to do and has urged holders of its ADSs not to accept the investor’s offer.

The mini-tender offer

TRC Capital is paying $182.75 in cash for each ADS of Shire. A single ADS represents three ordinary shares of Shire, which means that if TRC Capital manages to acquire 1 million ADSs, it would end up owning about 0.33% of Shire’s outstanding ordinary shares.

Shire has said that it has nothing to do with TRC Capital’s mini-tender offer and it goes ahead to call it an unsolicited offer that it cannot recommend to holders of its ADS.

Why is Shire fighting TRC Capital’s offer?

The reason Shire is warning holders of its ADSs against TRC Capital’s offer is that it believes that the offer doesn’t offer any meaningful value to them. For instance, Shire says that the $182.75 per ADS price that TRC Capital is offering is nearly 5% below the closing price of its ADSs just a day before the mini-tender commenced.

Therefore, Shire believes that TRC Capital is trying to acquire its shares at price that is below the market, thus denying holders of the shares the opportunity to generate maximum value from their holding.

The other reason Shire is not endorsing TRC Capital’s mini-tender is that it comes with strings attached. For instance, the investor says in the tender documents that it holds the rights to terminate the offer if the market price of Shire’s ADSs fall from their closing price on July 15.

The fact that TRC Capital has launched a tender offer that would only see it acquire less than 5% of outstanding shares of Shire also makes the company suspicious of the mini-tender.

Fast Track designation

Shire’s caution against TRC Capital’s mini-tender offer comes at a time when the FDA has granted Fast Track designation for the company’s drug candidate called SHP626 (volixibat). The drug is being developed as a treatment for a liver condition known as nonalcoholic steatohepatitis (NASH).

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