Shire to buy US biotech firm Baxalta for $32 bn

Irish drugmaker Shire Plc yesterday finally secured Baxalta International Inc's approval to buy it in a $32-billion cash and stock deal, six months after it first approached the US biotech firm.

Shire chairman Susan Kilsby and Baxalta CEO, Ludwig Hantson

A merged company will create the world's largest developer of drugs for rare diseases by revenue and pipeline depth, with multi-billion-dollar drugs in haematology, immunology, neuroscience, lysosomal storage diseases, gastrointestinal / endocrine, and hereditary angioedema.

London-listed Shire had in August 2015 said that it was seeking to acquire Baxalta, a company spun-off by Baxter International in July, for $30 billion to emerge as the leading global specialist in rare diseases. (See: Baxalta rejects drugmaker Shire's approach)

Baxalta rejected the offer saying that Shire's unsolicited bid significantly undervalued the company and adopted a "poison pill" defence, which makes any unwanted takeover very expensive for the buyer.

Shire  is now offering $18 in cash and 0.1482 in Shire American depositary share per Baxalta share, implying a total value of $45.57 per share based on 8 January prices.

The offer is 37.5 per cent above Baxalta's price on 3 August, before Shire tabled its bid.

Shire said that it has secured an $18-billion fully underwritten bank facility to finance the merger.

Post closing, Baxalta holders will hold a 34-per cent stake in the combined company.

Shire expects to realize more than $500 million in annual cost synergies within the first three years post-closing, which will be achieved by increasing efficiencies, leveraging the scale of the combined business, aligning to Shire's lean operating model and optimizing the combined R&D portfolio.

The two companies said that the deal will create the world's biggest rare-disease drugmaker after Baxalta overcome fears the merger may run in trouble due to US laws that prohibit tax-free spinoffs.

The merged company may have an effective tax rate of 16 to 17 per cent in Dublin where Shire is based compared to the 23 per cent currently paid by Baxalta in the US.

Shire said that its tax advisor has concluded that a merger with the proposed cash consideration of $18 per Baxalta share will maintain the tax-free status of the Baxalta spinoff from Baxter.

A combined company would see revenues of over $20 billion a year by 2020.

"This transaction presents a unique opportunity for Baxalta shareholders, who will receive substantial immediate value as well as an ongoing stake in a combined global leader in rare diseases with strong growth prospects.  said Baxalta CEO, Ludwig Hantson. "We bring to Shire a strong portfolio and pipeline of market-leading products, high-quality manufacturing capabilities and a talented global workforce that places patients at the center of everything we do."

Susan Kilsby, chairman of Shire, said, "Together, Shire and Baxalta create a platform for sustainable innovation, growth and value creation ….. Stakeholders of both companies are expected to benefit from the enhanced growth prospects, superior operational scale and efficiency and the strong financial and organizational profile of the combined entity."

The combined portfolio of the merged entity will have a range of therapeutic areas with more than 60 programs in development, including over 50 that will address rare diseases and the newly-approved Baxalta products adynovate, vonvendi and obizur.

Shire anticipates more than 30 recent and planned product launches from the combined pipeline to contribute approximately $5 billion in annual revenues by 2020.

Illinois-based Baxalta, which has a workforce of around 16,000, develops biotech treatments for rare blood conditions, cancers and immune system disorders and has annual revenue of $6 billion.

Baxalta offeres Shire a promising range of new products to complement its expanding portfolio of high-priced treatments for rare or "orphan" diseases.

London-listed Shire focuses on treatments in rare diseases, neuroscience, gastrointestinal and internal medicine and is developing treatments for symptomatic conditions treated by specialist physicians in other targeted therapeutic areas, such as ophthalmics.