Daily Management Review

Shire announces takeover bid for Baxalta


As per Shire, a merger between itself and Baxalta would create a company that would be a leading global specialist in rare diseases.

Shire has announced yesterday that it would like to acquire Baxalta so as to bring about a $30 billion strong company that will be a global leading solution specialist for rare diseases.
Although the U.S based firm turned out the acquisition during private talks earlier last month, Shire, went ahead and publicly announced its approach vis-a-vis Baxalta. Baxalta had rebuffed the offer and came out in a statement of its own saying that Shire's unsolicited offer significantly undervalued the company.
In the merger offer, Shire had valued each share of Baxalta to be at $45.23, which was its market price on 3rd August. Baxalta's shares however dipped 12 percent lower at $37.10. Shire's stock closed down about 6 percent.
The Illinois-based Baxalta, employs around 16,000 people and develops biotech treatments for rare blood conditions, such as cancers and those that affect the immune system. In 2014, its revenues touched $6 billion.
For Shire, Baxalta offers a promising range of new products to complement its growing portfolio. Naturally, there is no guarantee that Shire will successfully land its prey. Interestingly, Shire itself was the target of a failed takeover in 2014.
"Shire may need to go hostile and success rates of pharma hostile bids are low," said Leerink analyst Jason Gerberry.
Shire claims that it is in a position to generate sales of around $20 billion by 2020 thanks to its products which will be unrivaled in the rare disease market and that it will be able to generate double-digit sales growth per annum.
This announcement by Shire, is the latest in a wave of mergers and acquisitions that have struck the health sector industry since the beginning of 2014.
Shire's offer of 0.1687 Shire American depositary receipts per share, which represents a premium of 36 percent over Baxalta's stock price on Aug. 3, would give the U.S. firm's shareholders about 37 percent of the combined group.
Last year Shire itself was the target of a failed $50 billion takeover attempt by AbbVie. Since then its shares have risen significantly on AbbVie's offer with growing optimism for its line-up of high-priced medicines in the rare disease sector.
The news of the AbbVie deal came to light when the U.S. government changed its rules on American companies heading overseas in order to take advantage of lower corporate tax rates.
However, Shire is using its relatively low tax profile as a selling point on this deal with Baxalta, stating that a merger would give the group a 16%-17% effective tax rate by 2017, which would be much lower than the 21%-24% for Baxalta.
"Tax is just one part of it, it's not the main part," said Ornskov.The main driver for the merger would be the strategic fit and the growth potential for both companies.
With the news of this takeover intention coming out, shares prices of Actelion, fell by 2.9%. It was previously tipped to be its potential target.
Shire has appointed Morgan Stanley and Evercore as its financial advisers.
Source(s): Reuters.com