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Shire and Baxalta reach $32 billion merger agreement

Published on 11/01/16 at 01:18pm

One of the industry’s longest-running M&A sagas has finally reached a conclusion, with Shire and Baxalta announcing a $32 billion cash and stock merger agreement. 

Under the agreement Baxalta shareholders will receive $18.00 in cash, valuing Baxalta at $45.57 per share –  meaning Shire is paying a premium of some 37.5% on Baxalta’s share price as it stood at the time of Shire’s initial, rejected, offer in August 2015. Baxalta shareholders will own 34% of the combined company.

Shire will finance the deal with $18 billion financing, it said, while anticipating more than $500 million in annual cost synergies within three years of the deal closing.

The ability to get the deal over the line was reportedly said to hinge on how much cash the Irish company could offer as part of the terms without undermining the tax-free status of the Baxter International spinoff company, which is based in the US.

The companies say their merger will create the leading rare diseases platform in revenue and pipeline depth, with best-in-class, multibillion products in haematology; immunology; neuroscience; lysosomal storage diseases; gastrointestinal/endocrine; and hereditary angioedema (HAE). The companies will also have a growing oncology franchise 

The combined portfolio will have an expanded range of therapeutic areas with more than 60 programs in development, including over 50 for rare diseases and the newly-approved Baxalta products Adynovate (rurioctocog alfa pegol), Vonvendi (vonicog alfa) and Obizur (susoctocog alfa). Shire says it anticipates more than 30 product launches from the combined pipeline, contributing approximately $5 billion in annual sales by 2020.

Shire also pointed to the combined companies’ expanded geographic reach across more than 100 countries, and said the merger would create a sustainable platform for future innovation and growth.

Shire chief executive, Flemming Ornskov, comments: “This proposed combination allows us to realise our vision of building the leading biotechnology company focused on rare diseases. Together, we will have leadership positions in multiple, high-value franchises and become the clear partner of choice in rare diseases. 

"Our expanded portfolio and presence in more than 100 countries will drive our growth to over $20 billion in anticipated annual revenues by 2020. Our due diligence has reinforced our belief in the combination, and we look forward to welcoming Baxalta colleagues to a shared entrepreneurial, patient-driven culture.”  

Susan Kilsby, chairman of Shire, says: “Together, Shire and Baxalta create a platform for sustainable innovation, growth and value creation. Shire is an experienced and disciplined acquirer with a track record of delivering shareholder value. Stakeholders of both companies are expected to benefit from the enhanced growth prospects, superior operational scale and efficiency and the strong financial and organisational profile of the combined entity.”

Baxalta chief executive, Ludwig Hantson, comments: “Today’s announcement marks a new path forward for our organisation and is a testament to the significant progress we have made in achieving our strategic business priorities. This transaction presents 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.

"We bring to Shire a strong portfolio and pipeline of market-leading products, high-quality manufacturing capabilities and a talented global workforce that places patients at the center of everything we do. The combined organisation will be well positioned to accelerate innovation and deliver enhanced value for all stakeholders.”

Wayne Hockmeyer, chairman of Baxalta, comments: “We launched Baxalta to focus on purpose-driven performance, sustainable growth, and continuing our leadership in developing treatments for orphan and underserved diseases.

"While we have made great progress to-date and have had a measurable impact across all our businesses, I look forward to joining the board of the combined company to help ensure that we infuse the best of both organisations and foster a new shared culture that has the resources, the passion, and the commitment to continue to make a meaningful difference in the lives of our patients and their families.” 

Baxter international cChairman and chief executive, José Almeida says: “Baxter fully supports the proposed combination of Shire and Baxalta, which will create a major biotechnology company and global leader in rare diseases. Baxter is pleased to support this value enhancing transaction.”

Joel Levy 

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