Aug. 04--Barely a month after becoming an independent company, Baxalta -- the former biosciences division of Baxter International -- faces a battle over its future.
Irish drugmaker Shire said Tuesday that it has made an unsolicited offer to buy the Deerfield-based company for about $30.6 billion in stock.
In a statement, Shire said it made the takeover proposal on July 10, just 10 days after Baxter completed the spinoff of Baxalta. Shire said it decided to go public with the offer after Baxalta's CEO declined to engage in meaningful discussions about a deal.
After several hours of silence Baxalta said Tuesday afternoon that its board has "carefully reviewed" Shire's proposal and determined that it's not in the best interests of the company or its shareholders.
"The board today reaffirmed its conclusion that Shire's proposal significantly undervalues Baxalta and its attractive prospects for growth and value creation, and that a merger at this time would be severely disruptive at this very early stage of Baxalta's existence as a public company and presents a significant and real risk to value creation for our shareholders," Chairman Wayne Hockmeyer said in a statement.
Shire is the same company North Chicago-based AbbVie proposed to acquire last year for $55 billion to help diversify its drug portfolio and lower its U.S. tax bill. AbbVie walked away in light of new U.S. tax rules aimed at making it difficult for American companies to cut their taxes by shifting their corporate addresses overseas.
Shire is now pitching Ireland's lower tax rate compared to the corporate rate in the U.S. as a key benefit in a proposed combination with Baxalta, which sells drugs to treat rare bleeding disorders and immune deficiencies.
Under its proposed deal, Baxalta stockholders would receive 0.1687 Shire American depositary shares for each Baxalta share. The offer implies a value on Baxalta of $45.23 per share, a 36 percent premium to the company's Monday closing price.
Baxalta shares were up nearly 12 percent to $37.10 in trading Tuesday. Shire's ADRs were down 5.4 percent to $253.60.
Shire's pursuit of Baxalta so soon after the company became a stand-alone business is a sign of the times in the pharmaceutical industry. There has been a frenzy of dealmaking, including hostile bids, as drugmakers look to add sales amid pricing pressure from cash-strapped governments and insurers.
Since AbbVie terminated the deal in October, Shire CEO Flemming Ornskov has pursued an aggressive acquisition strategy to remake the company into a biotech power from a traditional drugmaker. Shire is best known for Vyvanse, a drug that treats attention deficit and hyperactivity disorder. Vyvanse had sales of $1.4 billion last year, about one-quarter of the company's 2014 revenue of $6 billion.
Baxalta fits into Shire's strategy to become a leading player in the lucrative field of medicines for rare diseases. Earlier this year, Shire acquired New Jersey-based NPS Pharmaceuticals for $5.2 billion. NPS makes drugs to treat a gastrointestinal disorder and an endocrine disease.
Baxalta has said it expects revenue of about $6 billion this year. Shire projected that the combined company would have sales of $20 billion by 2020.
"We believe the proposed combination of Shire and Baxalta would be strategically and financially attractive for both of our companies, accelerating our respective growth ambitions and creating the leading global biotech company in rare diseases," Ornskov said in a statement.
In a letter dated Tuesday to Baxalta CEO Ludwig Hantson, Ornskov said Hantson's "lack of engagement has been surprising."
Hantson fired back in a letter Ornskov, which Baxalta made public, that he has reviewed Shire's July 10 offer. "We do not believe that a combination of our two companies would be strategically complementary, or that our respective product portfolios would benefit from such a combination," Hantson wrote.
By going public with the offer, Shire puts pressure on Baxalta's board and management by appealing directly to its shareholders, said Chris Geier, a partner in the investment banking practice at Sikich, a Chicago-area professional services firm. If Shire can get shareholders on board, the company can push the deal forward even if Baxalta management isn't supportive.
Shire said it has not discussed the proposed bid with Baxter, Baxalta's largest shareholder with a 19.5 percent stake in the company. A Baxter spokeswoman declined to comment.
Generally there are rules that prevent spinoffs from being taken over immediately, but Shire, with its all-stock deal, may have found a way around that, said Karen Andersen, a health care analyst at Morningstar.
Shire said it believes the tax-free nature of the separation of Baxalta from Baxter would not be jeopardized by its proposed takeover.
The company also said the combination would lead to cost and tax savings. It projected a potential tax rate of 16 percent to 17 percent by 2017. Baxalta has said its tax rate would be 23 percent to 24 percent.
Andersen said Baxalta shareholders should support the deal, considering the strategic fit, the tax savings and the competitive threats to the company's hemophilia business.
asachdev@tribpub.com
