Dublin-based Shire said Monday it would buy U.S.-based Baxalta for $32 billion in a merger of rare disease drug makers that will catapult the two midsize companies into the same league as Bristol-Myers Squibb.
The companies said they were confident the merger would not run afoul of U.S. laws that prohibit tax-free spinoffs from being used as a “device” to funnel cash to shareholders. Baxalta spun out from parent Baxter International in July.
Shire has agreed to pay $47.50 per share, $18 of which would be in cash, to acquire Baxalta. That represents a premium of 37.5% over Baxalta’s closing share price on Aug. 3, the day before Shire disclosed its interest in the company.
The stock was down 2.5%, at $39.01, in trading Monday.
“This proposed combination allows us to realize our vision of building the leading biotechnology company focused on rare diseases,” Shire’s chief executive Flemming Ornskov said in a news release, predicting revenue will reach more than $20 billion by 2020.
As the Financial Times reports, Ornskov “has doggedly pursued his target for five months in the face of initial resistance from Baxalta and skepticism from his own shareholders.”
Ludwig Hantson, Baxalta’s chief executive, initially said there would be few synergies because of the lack of overlap between the companies’ portfolios.
But on Monday, he said the merger presented 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.”
According to the Wall Street Journal, some analysts have said Shire is taking on a risk with Baxalta, whose large hemophilia franchise faces looming competition from new treatments under development at rival drug makers.
As well as Baxalta’s hemophilia drugs, Shire would be adding immunology and cancer treatments to its portfolio, which largely consists of drugs for attention deficit hyperactivity disorder, rare diseases and ophthalmic conditions.
Shire said it had concluded that adding cash to its offer would not imperil the tax-free status of the Baxalta spin-off. If the U.S. Internal Revenue Service reached a different conclusion, Shire would be liable for a sum of “close to $10 billion,” Ronny Gal, an analyst at Bernstein, told the FT.