Linklaters and Slaughter and May have acted on a $1.1bn (£555m) convertible bond issue by the UK's third-largest drugmaker, Shire.

Slaughter and May advised regular client Shire on the deal, the largest UK convertible bond issue in recent years. Finance partner Richard Levitt led the team assisted by associate Jonathan Meloy and tax partner Tony Beare.

Linklaters capital markets partner Carson Welsh advised lead manager ABN Amro Rothschild, Barclays Capital, Citi, Goldman Sachs and Morgan Stanley, and lower-ranking managers Deutsche Bank and the Royal Bank of Scotland.

The issue of convertible bonds, which are repayable in 2014 unless converted into ordinary shares in Shire, is to re-finance Shire's acquisition of Nasdaq-listed rival New River in March.

Shire used convertible bonds to re-finance $1.3bn (£655m) of debt. Convertible bonds are cheaper to issue because investors typically take a lower coupon in exchange for the chance to benefit from rising equity prices. The bondholders have the right to exchange the bonds at the end of five years and Shire can force an exchange to equity if the shares exceed 130% of the face value.

Linklaters has advised on all the convertible bond issues by FTSE 100 and FTSE 250 companies in the last five years.

Welsh said: "People have said for a long time that the high level of M&A activity will see more convertible deals taking place and this deal backs that assertion up."