The first mega takeover of 2016 just landed
Thomson Reuters
The first big pharma deal of 2016 just landed.
After a months-long effort, Shire has agreed to buy biopharmaceutical company Baxalta for about $32 billion, making it the No. 1 maker of drugs to treat rare diseases.
Baxalta, which is based in Deerfield, Illinois, was spun off from healthcare company Baxter in July 2015. It's focus is on developing biotechnology treatments for blood disorders, cancer, and immune-deficiency disorders.
In a statement Monday, shire said rare diseases would generate 65% of the combined companies total revenues.
"Together, we will have leadership positions in multiple, high-value franchises and become the clear partner of choice in rare diseases," Shire's CEO Flemming Ornskov said in Monday's release. "Our expanded portfolio and presence in more than 100 countries will drive our growth to over $20 billion in anticipated annual revenues by 2020."
It didn't take long after Baxalta went public for Shire to reach out and try to acquire the company. Shire originally made an unsolicited offer of $30 billion in stock in August. That offer was rejected by Baxalta, but the two sides returned to talks late last year.
The drug industry has been gripped by a takeover wave as large pharma companies tap low-cost debt to fund purchases of smaller rivals. Only two deals in the past 12 months - Pfizer's $183 billion purchase of Allergan and Allergan's $40 billion sale of its generic-drugs business - are larger than the reported value of the Baxalta deal.
Thomson Reuters
Hantson, CEO of Baxalta, celebrates the company's IPO after ringing the opening bell above the floor of the New York Stock Exchange.
Shire is a Dublin, Ireland-based pharmaceutical company makes drugs to treat everything from ADHD to dry-eye disease, and is focused on developing drugs for rare diseases. Bloomberg reports the company expects to launch 30 new drugs over the next five years.
If Baxalta accepts the deal, the acquisition would give the company a lower tax rate because it too would move its headquarters to Ireland.
Here's the terms of the deal from Shire:
Shire plc (LSE: SHP, NASDAQ: SHPG) and Baxalta Incorporated (NYSE: BXLT) today announced that the boards of directors of both companies have reached an agreement under which Shire will combine with Baxalta. Under the agreement, Baxalta shareholders will receive $18.00 in cash and 0.1482 Shire ADS per Baxalta share. Based on Shire's closing ADS price on January 8, 2016, this implies a total current value of $45.57 per Baxalta share, representing an aggregate consideration of approximately $32 billion. The exchange ratio is based on Shire's 30-day trading day volume weighted average ADS price of $199.03 as of January 8, 2016, which implies a total value of $47.50 per Baxalta share.
The value of the offer, as of Shire's January 8, 2016 closing ADS price, represents a premium of approximately 37.5% to Baxalta's unaffected share price on August 3, 2015, the day prior to the public announcement of Shire's initial offer for Baxalta. This will provide Baxalta shareholders with approximately 34% ownership in the combined company. The parties expect the transaction to close mid-2016.
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