Final Countdown: AbbVie's Imminent Closure With ImmunoGen And What It Means

Summary

• AbbVie Inc. is set to finalize its deal for ImmunoGen, Inc. on February 12, with a small upside to the deal's closing price.
• The narrow spread and potential trading costs make it a reasonable decision to sell at this point.
• The yield on short-term treasuries is 5.31%, and that's the minimum for the annualized yield I'm looking for here.

AbbVie Inc. (ABBV) is about to finalize its deal for ImmunoGen, Inc. (NASDAQ:IMGN) on February 12. IMGN shares now trade at $31.23 (pre-market $31.24), which means there is around a 0.09% upside to the deal's successful closing for $31.26. The spread rapidly closed after the company reported the HSR waiting period passed, and the company expects to close it on the 12th. In my previous write-up on the AbbVie-Immunogen deal, I explained why I thought this would be unlikely to get a 2nd request. Given the narrow spread left here, I think it's a reasonable decision to sell.

However, whether it is optimal to sell or hold rapidly changes as time passes, or the price changes even by $0.01, because we are so close to the end.

I think this final window is an exciting window to look at M&A deals, but many people may not want to bother because of the small gain in absolute terms. Trading costs can also have a significant impact and reduce actual annualized returns.

As mentioned, I previously wrote an article about the possibility this might get taken out, and then a follow-up of when this AbbVie Immunogen deal was most likely to close. Management guided towards halfway through 2024. I estimated it would most likely be between 100-250 days from December 1st.

Below is an overview of a few scenarios of what annualized returns would have looked like if the deal had closed between 100 days and 250 days. It is now actually closing faster than the bottom end of my range. It is really nice to have a win like this because, recently, M&A has been incredibly tough, with a lot of regulatory pushback and deal complications. This deal now almost certainly results in an annualized closing yield over 26% from that article.

The big question is what the yield looks like from here forward. Because figures will quickly change, I've created a quick reference table showing what annualized returns look like from here until the close and at different price points (that I believe are more likely to materialize). I don't think it will dip, something like $0.05 from here out.

I think it's fair to compare the annualized yield (factor in you'll experience transaction costs) vs. the short-term U.S. treasury rate, which is 5.31%, to see if it is attractive. I've assumed the money will take three days to hit my account after closing. So, the shortest period I've looked at is four days.

Theoretically, there is always a break risk. However, the shareholder vote is in the bag, HSR has expired, Germans FCO has been attained, and the companies have communicated they're about to close. On top of that, the break fee is huge.

I shouldn't put this at 100% closing odds, but I don't think I'm far off with 99.9%. It could fail, but it would be shocking. On the order of magnitude of Tim Scott having 10x as much chance of winning the next U.S. elections. I don't intend anything political with that, and I don't even know what party he would represent. Just to illustrate what I think the odds are here. Today, I believe it is best to sell ImmunoGen, Inc. shares at $31.23 or $31.24, but keep your eyes open, as the deal could become attractive again in the coming days.