August 4, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Only a day after announcing that it had acquired eye care company Foresight Biotherapeutics Inc. for $300 million, Shire announced it had proposed a $30 billion merger in July with Baxalta, but was turned down.
The original proposal was made on July 10, 2015 based on an all-tax transaction. The implied value of the deal would have been $45.23 per Baxalta share, which is about 36 percent over the Aug. 3, 2015 Baxalta stock price. Baxalta spun off from Baxter International on July 1, 2015. Had the deal gone through, Baxalta shareholders would have owned about 37 percent of the combined Shire group.
In a letter to Ludwig Hantson, president and chief executive officer of Baxalta, Flemming Ornskov, chief executive officer of Shire wrote, “We have sought to engage with you regarding such a combination since early July. Other than a brief meeting on July 10, at which we outlined our proposal and its benefits, your lack of engagement has been surprising. On July 31, weeks after receiving our written proposal and without any meaningful interaction, you stated that you had concluded it was not a basis for discussions. As a result, you have left us with no choice but to make our proposal known to your shareholders. We believe they deserve an opportunity to consider it.”
Today’s announcement and subsequent conference call is clearly focused on alerting shareholders and the Board of Directors on the offer and the short-term and long-term advantages to such a merger.
The combined companies were projected to create $20 billion in sales by 2020, with up to 30 new drugs to launch over five years. In addition to the overall share package, because Baxalta, headquartered in Deerfield, Ill., would have gotten a lower tax rate because Shire is based in Ireland. The rate could potentially drop from 23 to 24 percent to about 16 to 17 percent.
“From a rare disease point of view,” said Klara Fernandes, an analyst at Berenberg Bank in London to Bloomberg Business, “it does seem to make sense.”
Baxalta had net sales of $6 billion in 2014. Shire had sales of $5.83 billion last year.
In July 2014, Shire and Chicago-based AbbVie announced a merger agreement, but that deal fell through. From that fallout, Shire received a $1.64 billion break-up fee from AbbVie, which put them in a position of being able to shop. In January 2015 Shire acquired N.J.-based NPS Pharmaceuticals, Inc. for $5.2 billion.
When asked if Shire would consider a hostile takeover bid at this morning’s web conference call, Ornskov declined to discuss strategy. “We have tried to engage with the management and executives, we think we have an attractive deal, but we would like to sit down with them and do our due diligence and discuss the advantages of a merger. …We hope to sit down with the executives and hopefully the Board of Directors and engage on this offer.”
