British drugmaker Shire will recommend to its shareholders a revised £31bn takeover proposal from US rival AbbVie.
Shire's board is backing the latest offer of £53.20 ($91.05) per share.
The US company began bidding for Shire in May. The deal is an attractive one for AbbVie, as it could dramatically reduce its tax bill.
Shire said it received a further revised proposal from AbbVie on 13 July with an indicated value of £31.3bn (€39.4bn, $53.6bn) or £53.20 per Shire share. Under the revised proposal, Shire shareholders would own about 25% of the combined entity.
"The Board of Shire has indicated to AbbVie that it would be willing to recommend an offer at the level of the Revised Proposal to Shire shareholders subject to satisfactory resolution of the other terms of the offer," the company said in an update.
"Accordingly, the Board is in detailed discussions with AbbVie in relation to these terms."
However, Shire noted that the revised proposal still remains subject to the pre-conditions set by AbbVie on 8 July including due diligence, and there can be no certainty that any firm offer will be made.
The company earlier confirmed media reports that it is early-stage talks with AbbVie, which has improved its terms for the merger.
Media reports earlier said the companies are in talks for a £30bn merger, which would change North Chicago, Illinois-based AbbVie's tax regime to the UK. The move is expected to reduce the company's corporate tax rate to 13% from the current 22%.
In June, Shire rejected a £27bn merger proposal from AbbVie, valuing each Shire share at £39.50. It said the proposal "fundamentally undervalued the company and its prospects".
Shire generates about 40% of its sales from medicines for attention deficit hyperactivity disorder. In addition, the firm has developed drugs treating rare genetic disorders, and is developing unique treatments in ophthalmology and other specialty disease areas.
With its tax base in Ireland, Shire has been an acquisition target of US drugmakers; large US pharmas go on the acquisition trail in places like the UK and Canada because they say the high corporate tax rate in their home country means they cannot compete on a level playing field.
Shire shares closed at £48.70 on 11 July.