Baxalta Playing Hard to Get as Shire Sweetens Deal

Baxalta Playing Hard to Get as Shire Sweetens Deal
December 23, 2015
By Mark Terry, Breaking News Staff

Illinois-based Baxalta is still playing hard to get, as Dublin-based Shire sweetened its deal to acquire the company.

In July, Shire made a bid for Baxalta, which wasn’t accepted. In early August, Shire went public with the offer in hopes of pressuring the Baxalta board and shareholders to consider the deal. Baxalta had only recently spun off from Baxter International on July 1, 2015.

Since then, Shire has made several attempts to improve on the bid. Baxalta’s management has argued that Shire’s bids undervalue the company, and that so soon after the spinoff a merger would be disruptive.

Baxalta has a market cap of $22.7 billion and would complement Shire’s portfolio of rare or “orphan” disease therapeutics. If combined, the merged companies would have sales of about $20 billion by 2020, with a projected annual sales growth in the double digits. Baxalta has plans to launch 20 drugs by 2020 that would have a projected combined sales greater than $2.5 billion.

The Financial Times, however, reported yesterday that even though Baxalta is considering the Shire bid, it is also looking around to see if anyone else might be interested in buying it—rather like a teenage girl holding out for a prom invitation from a cuter guy. Part of Baxalta’s willingness to consider, apparently, is that Shire has agreed to include cash in its deal. Prior to this most recent bid, it was an all-stock transaction, partly because of the nature of the Baxter spinoff. Under the terms of the spinoff, there would be a tax penalty on a cash deal.

As reported by The Financial Times, “People familiar with the situation said [a cash deal] was no longer seen as ‘a black and white matter’ after Shire received advice that there may be a way to introduce a cash component without triggering a big tax bill.”

An analyst at Bernstein, Ronny Gal, suggested that a deal might run at $52 per share with 30 percent in cash. That would value Baxalta at about $35 billion.

Other possible suitors—although nobody has stepped up publicly—could be Paris-based Sanofi or Chicago-based AbbVie Inc. . However, Dublin’s low tax rate would be an advantage for Shire over the French and American companies.

And Shire hasn’t just been waiting around with money in its pocket to spend. In November, the company acquired Burlington, Mass.-based Dyax Corporation for about $5.9 billion. Dyax is a publicly traded company that focuses on plasma kallikrein (pKal) inhibitors for the treatment of HAE. It currently has Kalbitor on the market for HAE. It also has a pipeline product, DX-2930, which is Phase III-ready, and has received Fast Track, Breakthrough Therapy, and Orphan Drug designations by the U.S. Food and Drug Administration (FDA). It has also received Orphan Drug status in the European Union.

Baxalta is currently trading for $39.77 per share, almost to its yearly high of $40.35 on Aug. 17. Shares traded for $30.60 on July 27 before rising to that figure, then jumped around before hitting another low of $30.77 on Oct. 13. Shares have since been on a fairly steady increase.

Shire , on the other hand, has been volatile and on a more or less downward trend since August. Shares traded on Feb. 9 for $215. 77, rose to $268.08 on Aug. 3, dropped back to $196.86 on Oct. 13. Shares then spiked again to $231.08 on Oct. 28, but dropped to $188.55 on Dec. 14. Shares are currently trading for $196.48.

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