Shire Holds Talks With Baxalta That May Lead to Takeover

  • Drugmaker preparing improved offer that may add cash
  • Companies may reach deal soon, depending on offer terms

Shire, Baxalta May Reach Deal Soon

Shire Plc is in takeover talks with Baxalta Inc. and is making progress toward a deal as the drugmaker seeks to expand in rare diseases and fend off larger competitors, according to people with knowledge of the matter.

Shire is preparing an improved offer that could include a significant cash component and that may come within the next several weeks, the people said, asking not to be identified because the deliberations are private. The drugmaker’s previous $30 billion all-stock proposal was rejected five months ago. Baxalta has been seeking a higher offer that includes cash, according to two of the people.

No final decision has been made and talks could still fall apart, the people said.

Baxalta shares rose as much as 4 percent and were 0.8 percent higher at 12:44 p.m. in New York. Shire’s U.S.-listed shares traded 0.8 percent lower.

Mark Enyedy, head of corporate development for Dublin-based Shire, declined to comment specifically on the deal, though he said that the company and its executives are “disciplined, highly experienced dealmakers.”

Price Discipline

“We have and will continue to show strong deal and price discipline and will only do deals that create value for our shareholders,” Enyedy said in an e-mailed statement.

A spokesman for Deerfield, Illinois-based Baxalta declined to comment on the matter.

In July, Shire offered Baxalta shareholders 0.1687 of its American depositary receipts for each share held, valuing the target company’s stock at $45.23.

After his company rejected that proposal, Baxalta Chairman Wayne T. Hockmeyer said in a statement that the offer significantly undervalued the business and that a merger would be “severely disruptive” for the newly public company. Shire’s original bid was structured as an all-stock transaction in an effort to preserve the tax benefits of Baxalta’s July spinoff from Baxter International Inc.

$20 Billion Sales

If a deal succeeds, the enlarged company would generate $20 billion in sales by 2020, with as many as 30 new drugs to launch over five years for diseases ranging from dry eye disease to hemophilia, Shire has said.

Rare-disease treatments have become one of the hottest properties for pharmaceutical manufacturers because of the potential for high-priced products and incentives offered by regulators, including tax breaks and additional market exclusivity. The U.S. Food and Drug Administration defines rare diseases as conditions that affect fewer than 200,000 people in the U.S.

Baxalta would benefit from a lower tax rate by being taken over by Shire, which has a Dublin legal address despite keeping many operations elsewhere. The U.S. drugmaker had projected a tax rate of 23 percent in 2016. A combination would yield an effective tax rate of 16 percent to 17 percent, Shire has said.

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