Shire Guns For Baxalta

Aiming to create a global leader in rare diseases, Shire has made an unsolicited bid worth roughly $30 billion for Baxalta, the specialty pharmaceuticals company spun off last month from Baxter. Baxalta roundly rejected the offer, which it says undervalues its business.

Shire first approached the Illinois-based firm privately on July 10, only to be rebuffed. In a subsequent letter to Baxalta chief executive officer Ludwig N. Hantson, Shire CEO Flemming Ornskov said Hantson’s “lack of engagement has been surprising,” adding, “You have left us with no choice but to make our proposal known to your shareholders.”

Last week, Hantson fired back during a call with analysts. Describing the offer as “wholly inadequate,” Hantson pointed out that the share price Shire offered is one Baxalta expects to achieve on its own over the next year. “We have an attractive set of franchises, and it would be a shame to hand it over for a lowball valuation,” he said.

Currently, each company has roughly $6 billion in annual sales. According to Shire, by 2020 the combined firm could achieve $20 billion in sales, 65% of which would come from rare disease treatments.

The combined company could also cut costs by streamlining research and wielding more buying power with contract manufacturers, Shire says. Moreover, the deal would ease taxes on Baxalta’s earnings. Because Shire is headquartered in the U.K., the combined company would see a tax rate of 16–17% in 2017 instead of Baxalta’s latest rate of about 23%.

Shire has been on an acquisition binge since a deal to be acquired by AbbVie fell through last year. So far this year, Shire has bought NPS Pharmaceuticals, adding a marketed drug for a rare disease called short bowel syndrome; rare gastrointestinal disease firm Meritage Pharma; and eye disease-focused Foresight Biotherapeutics.