Pharma mania: Shire offers $30B for Baxalta

Ireland-based pharmaceutical giant Shire PLC (SHPG) Tuesday announced an unsolicited $30 billion all-stock offer for U.S. biotech rival Baxalta (BXLT).

The transaction, the latest in a continuing wave of pharma mergers and acquisitions, would create the leading global biotech company focused on rare diseases, Shire said.

The proposed deal represents a strong strategic fit that would generate an estimated $20 billion in product sales by 2020, Shire said. The companies have the industry's largest rare diseases portfolio, with more than 50 projects.

The announcement sent Baxalta shares up 11.92% to a $37.10 close in Tuesday trading. Shire shares were down 5.40% at $253.60.

Baxalta investors would receive 0.1687 of Shire's American Depositary Receipts for each share they hold in the Deerfield, Ill.-based biotech company whose spin off from Baxter International (BAX) was completed last month.The proposal implies a value of $45.23 for each Baxalta share and represents a 36% premium over the company's stock price as of Aug. 3, Shire said.

Baxalta shareholders would own approximately 37% of the combined Shire group if the transaction were approved.

"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," said Shire CEO Flemming Ornskov in a statement issued with the proposal.

In response, Baxalta board Chairman Wayne Hockmeyer said  the panel on Tuesday reaffirmed its earlier 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.”

Faced with Baxalta's decision against starting  substantive discussions about the proposal, Shire released copies of a letter Ornskov sent Tuesday to Baxalta President and CEO Ludwig Hantson. The letter characterized the "lack of engagement" as "surprising."

"As a result, you have left us with no choice but to make our proposal known to your shareholders," Ornskov wrote. "We believe they deserve an opportunity to consider it."

While the letter signaled the possibility Shire would move forward with a hostile takeover bid, Ornskov's separate statement disclosing the proposal said, "It is our strong preference to immediately enter into a negotiated transaction to explore the full potential of the proposed combination and finalize the terms of an agreement."

The proposed deal comes nearly 10 months after U.S. biopharmaceutical firm AbbVie scrapped its planned $55 billion merger with Shire. The decision came after the U.S. Department of the Treasury adopted new rules to make so-called corporate tax inversions — deals in which a U.S. company shifts its headquarters overseas to help cut its future tax bills — less profitable and harder to complete.

AbbVie (ABBV), which would have moved its legal address to the United Kingdom as part of the plan, said the Treasury action "fundamentally changed the implied value of Shire to AbbVie" in ways that made it impossible to achieve "an acceptable return for our shareholders."