London: British drugmaker Shire has rejected a £27 billion ($46 billion) takeover offer from AbbVie, the latest attempt by a U.S. health care firm to tap into the London-listed group’s low tax rate.

Shire, which has no single controlling shareholder, has been seen as a prime takeover target for U.S. drugmakers due to its attractive rare diseases business and tax base, which is currently in Ireland.

Abbvie’s takeover offer proposed creating a new U.S.-listed holding company with a UK tax domicile in a so-called “inversion” move.

In a statement issued on Friday Shire said that following a meeting with Abbvie to discuss key aspects of its “highly conditional” proposal the board decided to reject it, “on the basis that it fundamentally undervalued the company and its prospects.” “The board also had concerns regarding the execution risks associated with the proposed (tax) inversion structure, as AbbVie would redomicile in the UK for tax purposes,” the company added.

Shire said in particular the proposal undervalued the company and its prospects in rare diseases and speciality markets as it expected to more than double its 2013 product sales to $10 billion by 2020.

AbbVie had released a statement earlier confirming that its offer had been rejected after Reuters revealed the talks late on Thursday.

Shares in the Dublin-based firm were up 12 per cent at £41.95 per share, below the £46.26 offer from AbbVie, and giving it a market capitalisation of about £25 billion. Shire said the offer was £20.44 in cash and 0.7988 Abbvie shares for every Shire share.

Analysts at Panmure said they believed Abbvie would have to increase its offer to more than £50 per share to make the deal happen.

“We see limited product portfolio synergies, hence assume cost savings, tax benefits, diversification, and Shire’s attractive growth to be the M&A drivers,” analysts at Jefferies said.

Founded in 1986 in Britain, Shire conducts most of its business in the United States and has been domiciled in Ireland for tax purposes since 2008.

The low tax rates have made it extremely attractive to U.S.

firms and follows the announcement earlier this month that U.S.

medical device maker Medtronic Inc had agreed to buy Dublin-based Covidien for $42.9 billion and shift its executive headquarters to Ireland.

Pfizer’s failed attempt to buy Britain’s AstraZeneca

was also partly motivated by a desire to lower its tax rate.

Confirmation of the talks could kick off a bidding war for Shire, with sector bankers expecting the group to also prove appealing to U.S. pharmaceutical and biotech firms such as Bristol-Myers Squibb, Amgen, Gilead and Biogen.

Shire was previously approached by Botox-maker Allergan

months before the U.S. group itself became a takeover target for Valeant, Reuters reported earlier this year.

AbbVie said it made an initial cash and share proposal in early May, with an indicative offer of £39.50 per share.

Its third and latest cash and share proposal represented an indicative offer of £46.26, it said.

It did not describe the last offer as final, meaning it could come back with a higher price. It has been given a deadline to either make a firm intention to make an offer, or walk away, by 1600 GMT on July 18.

AbbVie, which makes rheumatoid arthritis drug Humira, has a market capitalisation of around $86 billion.

Shire specialises in medicines for attention deficit hyperactivity disorder (ADHD), which account for around 40 per cent of its sales. The firm also sells drugs to treat rare genetic disorders and is building up a portfolio of treatments in ophthalmology and other speciality disease areas.

Shire is being advised by Citi, Evercore and Morgan Stanley whilst Abbvie is being advising by JPMorgan.