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Exclusive: Allergan approached Shire about takeover but rebuffed -sources

By Olivia Oran, Soyoung Kim and Nadia Damouni

NEW YORK (Reuters) - Allergan Inc approached Shire Plc in recent months about a possible takeover but was rebuffed, according to people familiar with the matter, in the latest example of a U.S. drugmaker seeking to buy an overseas rival to lower its tax rate.

The preliminary approach for Shire, which is based in Ireland and has a market value of $33 billion, did not progress to serious discussions between the two companies, the sources said.

Since then Allergan has received an unsolicited $47 billion takeover offer from Valeant Pharmaceuticals International Inc teamed up with activist investor Bill Ackman's Pershing Square Capital Management.

Analysts have suggested one way for the Botox maker to defend against the unsolicited bid would be to acquire foreign drugmakers such as Shire, Jazz Pharmaceuticals Plc or Alkermes Plc.

One of the sources said it was unclear if Allergan would try to revive talks with Shire, or pursue another target as a means to remain independent.

Representatives for Allergan and Shire declined to comment.

In a process known as inversion, U.S. drugmakers are looking to relocate their headquarters to other countries with lower tax rates. These companies are eying potential targets that are based in Ireland in particular because of a low 12.5 percent corporate tax rate, compared to 35 percent in the United States.

Recent deals that have been driven by tax advantages include generic drugmaker Actavis Plc's $8.5 billion acquisition of Dublin-based Warner Chilcott and Perrigo Company Plc's $8.6 billion acquisition of Elan.

Generic drugmaker Mylan Inc is also looking at acquisition targets that are based outside of the United States because of competitive pressures from rivals with a less burdensome tax structure, people familiar with the matter said.

Valeant's offer for Allergan comes amid a flurry of healthcare deals this week including medical device company Zimmer Holdings Inc's $13.4 billion acquisition of rival Biomet; a $20 billion asset swap between Novartis AG and GlaxoSmithKline Pharmaceuticals PLC; and Eli Lilly and Co's acquisition of Novartis' animal health business for $5.4 billion.

Those deals have driven healthcare M&A volumes to $153.3 billion so far this year, the highest year-to-date level since Thomson Reuters has started tracking data. Pharmaceutical deals have accounted for 71 percent of overall healthcare deals.

Valeant has been on a buying spree since 2010 and last year acquired contact lens maker Bausch & Lomb Holdings. Chief Executive Michael Pearson said in January the drugmaker wants to become one of the world's top five pharmaceutical companies by market capitalization by the end of 2016, largely through acquisitions.

Pearson said on Tuesday Allergan Chief Executive David Pyott and the company's board had been unwilling to discuss a merger with Valeant. In a letter to Allergan, Valeant said it would have preferred to negotiate a deal in private.

Allergan said in a statement on Tuesday that it has received the offer, and will carefully consider the proposal and "pursue the course of action that it believes is in the best interests of the company's stockholders."

(Reporting by Olivia Oran, Soyoung Kim and Nadia Damouni in New York; Editing by Lisa Shumaker, Bernard Orr)

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