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Shire To Acquire Baxalta In $32 Billion Transaction

Acquisition: Six-month courtship ends with creation of drug giant for rare diseases

by Marc S. Reisch
January 18, 2016 | A version of this story appeared in Volume 94, Issue 3

After a six-month courtship, the Irish drugmaker Shire has succeeded in wooing Illinois-based Baxalta in a $32 billion acquisition that creates a giant in rare disease treatments.

The agreement, reached on Jan. 11, brings together Baxalta’s strengths in hematologic and immunologic ailments with Shire’s capabilities in lysosomal storage, gastrointestinal, and endocrine diseases.

On the basis of 30 recent and planned product launches, Shire projects that its combined annual revenues of $12 billion will grow to $20 billion by 2020. Supporting Shire’s projection is the fact that insurance firms are often more willing to pay high prices for rare disease treatments than for widely used drugs.

Baxalta CEO Ludwig N. Hantson initially spurned the advances of Shire CEO Flemming Ornskov, who approached him last July just a day after Baxalta was spun off from Baxter International. Hantson described the $30 billion all-stock offer as “wholly inadequate” and said “it would be a shame to hand [Baxalta] over for a lowball valuation.”

Hantson’s change of heart followed an offer that includes about the same amount of Shire stock plus more than $12 billion in cash to account for a decline in Shire’s share price and an increase in Baxalta’s price since August.

For investors, a strong argument in favor of the deal is the lower corporate tax rate in Ireland versus the U.S. Shire says the combined firm will have an effective rate of about 17% in 2017 versus Baxalta’s current rate of 23%.

Shire also expects to save $500 million via efficiencies and “optimizing the combined R&D portfolio.”


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