Baxter International Gets Ready to Unload $1.45 Billion Baxalta Stake

$1.45 Billion in Baxalta Stock To Be Offered as Baxter Completes Separation from Baxalta
September 2, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Baxalta Incorporated, headquartered in Bannockburn, Ill., announced yesterday that it had filed a Registration Statement with the U.S. Securities and Exchange Commission (SEC) regarding a secondary offering of up to $1.45 billion of common stock. The stock is currently being held by Baxter International . In July, Baxter spun off Baxalta.

Baxalta has been in a back-and-forth with Dublin-based Shire since July, when Shire contacted Baxalta regarding an acquisition. When Baxalta executives did not respond, Shire forced the issue by going public on Aug. 4 in an attempt to pressure Baxalta’s executives, board and investors into considering the deal.

There has been some speculation that Baxalta isn’t directly opposed to the deal itself, but feels that the original offer undervalued the company. Another reason offered for not engaging with Shire is that so soon after its separation from Baxter, a merger would be too disruptive.

In a recent interview, Baxalta’s chief scientific officer and global head of research and development, and executive vice president, John Orloff, discussed the company’s interest in relying on pre-clinical work and discovery performed at universities and small biotech companies as opposed to a focus on performing its own. The company will continue to do its own research and development, but will emphasize acquiring promising compounds and technology.

The company plans to launch 20 drugs by 2020 with projected combined sales exceeding $2.5 billion.

Most recently there were rumors that Baxalta was in talks to acquire Cambridge, Mass.-based Ariad Pharmaceuticals, Inc. , which focuses on oncology. Ariad also markets the cancer drug Iclusig.

Shire’s interest in Baxalta, however, is to strengthen its focus on rare diseases. Analysts note, however, that Shire did not counter-offer after Baxalta’s second quarter financial report, which exceeded expectations. Flemming Ornskov, chief executive officer of Shire, recently commented that if the deal with Baxalta went through, he would focus on cutting costs up to $1 billion, half of which would have to do with overlapping research and development expenses.

“It is believed that the cost-savings announcement is an attempt by Shire management to prepare shareholders for a sweetened Baxalta bid,” wrote Hannah Ishmael in BidnessEtc. “Any higher bid would mean a secondary offering, and hence, existing shareholders have to be accepting of a dilution.”

Baxalta indicated that starting today it will begin trading ex-dividend. Shareholders who purchased BXLT stock prior to the ex-dividend date can receive a cash dividend payment of $0.07 per share, which will be paid on Oct. 1, 2015.

In terms of today’s announcement regarding the proposed secondary offering, which will be underwritten by J.P. Morgan Securities LLC, it is, according to the company statement, “consistent with the previously disclose plan of Baxter to engage in certain debt-for-equity exchanges to dispose of its retained stake in Baxalta in a tax-free manner within the 18-month period following Baxalta’s separation from Baxter. Baxalta is not selling any shares in the offering and will not receive any proceeds from the offering.”

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