Shire in US$30bn takeover battle
05.08.2015 - Irish pharma and biotech major Shire wants to be number one in orphan diseases, and is setting out to acquire US-American Baxalta in a US$30bn deal – by any means necessary.
Shire has big goals: to be “the leading global biotech company focused on rare diseases”. And to succeed, the Irish company is prepared to engage in a hostile takeover. After getting nowhere with the board of its target company Baxalta, it has turned directly to the US company’s shareholders. Shire’s offer: a merger based on an all-stock transaction which would net Baxalta shareholder 0.1687 Shire ADRs, worth US$45,25, for each of their Baxalta shares. This represents a premium of 36% over Baxalta’s stock price on 3 August. Baxalta shareholders would end up owning 37% of the combined company.
Shire is not letting grass grow under its feet: their first proposal to Baxalta only happened on 10 July and met with a less than lukewarm reception. The US company’s “lack of engagement has been surprising,” Shire CEO Flemming Ornskov writes in a letter to Baxalta CEO Ludwig Hantson. He believes the reasons for the merger to be compelling. The combined company would be a leader in rare diseases and have multiple billion-dollar franchises in high-value therapeutic areas. Product revenues could reach up to US$20bn by 2020, with the financial and operational resources to invest in further innovation and growth in orphan diseases. Ornskov felt Shire had no other choice but to contact the shareholders directly.
“We believe the proposed combination of Shire and Baxalta would be strategically and financially attractive for both of our companies, accelerating our respective growth ambitions and creating the leading global biotech company in rare diseases,” Ornskov said in a statement, and concluded: “It is our strong preference to immediately enter into a negotiated transaction to explore the full potential of the proposed combination and finalise the terms of an agreement.”
Baxalta disagrees. The company has published a statement saying the proposal was not in the best interest of the Deerfield-based company. “The Board today reaffirmed its conclusion that Shire’s proposal significantly undervalues Baxalta and its attractive prospects for growth and value creation, and that a merger at this time would be severely disruptive at this very early stage of Baxalta’s existence as a public company and presents a significant and real risk to value creation for our shareholders,” said Wayne Hockmeyer, Chairman of the Board of Baxalta. It seems unlikely that Shire will take no for an answer this time around.