Bank Of America: AbbVie's Decision To Reconsider Merger With Shire 'A Surprise To Us'

On Tuesday, AbbVie Inc (NYSE: ABBV) stated that its Board of Directors will meet on October 20 to reconsider its recommendation that shareholders approve the proposed merger agreement with Shire PLC (NASDAQ: SHPG).

Shire responded and confirmed that its Board of Directors believe AbbVie should proceed with the recommended offer.

Related Link: Shire Shares Plummet On Possible Buyout Cancellation

"This move is a surprise to us and investors, especially in light of AbbVie's CEO Rick Gonzalez' letter to Shire employees on 9/29/14 communication his enthusiasm for the deal," Bank of America analyst Colin Bristow wrote in a note to clients on Wednesday. AbbVie's statement notes that the Board will consider the Treasury's proposed changes to tax regulations.

Bristow adds that there are three potential explanations for the company's update. First, there is a "disagreement" over the deal progression between the Board and management. Second, AbbVie is in the process of withdrawing its merger recommendation and is "treading the formal process." Finally, AbbVie is formalizing its position to protect itself against potential future litigation if issues arise after the deal is closed.

"We would highlight that we still see AbbVie as an attractive stand-alone entity at these levels (se wee stand-alone value at around $60 per share), but acknowledge that the probability of the Shire deal progression appears to be lower at this point," Bristow wrote.

Bank of America maintained a Buy rating on AbbVie with a $65 price target.