4th Aug 2015 13:06
LONDON (Alliance News) - Shire PLC on Tuesday took a USD30 billion proposal for an all-share merger with US biotechnology company Baxalta Inc directly to Baxalta shareholders, as the board of Baxalta has refused to enter into talks, as Shire urged Baxalta to engage with the proposed deal.
Shire shares dropped after news of the proposal was released Tuesday afternoon, down 3.8% to 5,513.34 pence, the second worst performer in the FTSE 100.
The combined company would be projected to deliver product sales of USD20 billion by 2020, Shire said, which is double the USD10 billion by 2020 that Shire is targeting independently. The deal is expected to generate double-digit top-line growth, strong returns and attractive value creation, Shire said. It would be break even to non generally accepted accounting principles earnings per share in the first year, and add to non-GAAP earnings per share thereafter.
The FTSE 100 pharmaceutical company based in Dublin said that under the terms of its proposal, Baxalta shareholders would receive 0.1687 Shire American Depositary Receipts with a value of USD45.23, representing a 36% premium to Baxalta's closing share price on Monday. Should the merger go through, Baxalta shareholders would own 37% of the combined company.
Following closing of the deal, Shire said it will kick off a share buyback to repurchase, within two years, up to 13% of the combined post-transaction shares outstanding.
Shire Chief Executive Officer Flemming Ornskov said it is Shire's "strong preference to immediately enter into a negotiated transaction to explore the full potential of the proposed combination and finalise the terms of an agreement."
In a latter to Baxalta Chief Executive Officer Ludwig Hantson, Ornskov indicated that Shire had made the proposal in early July, and the two had held a brief meeting on July 10, but last Friday Baxalta had said it "had concluded it was not a basis for discussions". As a result, Ornskov said Shire had been left with no choice but to make the proposal known to Baxalta's shareholders, as they "deserve an opportunity to consider it".
Baxalta was spun-off from Baxter International, a NASDAQ listed healthcare company head quartered in Illinois, at the beginning of July, as Baxter decided to split its biopharmaceuticals and medical device segments into independent companies. Baxalta is focused on orphan diseases and underserved conditions, and in early July, said it planned to launch 20 new products by 2020.
At that time, Baxalta said it is targeting for new products and indications to contributed USD2.5 billion in sales by 2020, building on a base of USD6 billion in annual revenue.
In the letter to Baxalta's Hantson, Ornskov explains that as the consideration for the merger will be paid in ADRs, it believes the tax-free nature of Baxalta's separation from Baxter will not be jeopardised, and it will be able to meet its related obligations to Baxter under their separation agreements.
Shire had not discussed the potential transaction with Baxter, waiting until the separation was completed before contacting Baxalta. It says a combination with Shire would fully align with Baxalta's "articulated vision to become a leading rare/orphan diseases company".
Shire said the deal would create a company with more than 30 planned product launches and the largest rare diseases portfolio in the industry with 50 plus projects.
"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 Ornskov in a statement.
Shire has been the subject of a great deal of takeover speculation itself, since its proposed USD54 billion takeover by US drugmaker AbbVie Inc collapsed last October, a casualty of new US Treasury measures put in place to curb so-called "tax inversion" deals. Shire received a USD1.64 billion break fee from AbbVie after the deal fell-through.
Since then it has made a few acquisitions, acquiring NPS Pharmaceuticals for USD5.2 billion in January, Meritage Pharma for USD70 million in February, and on Monday it acquired Foresight Biotherapeutics for USD300 million, all US companies. There also have been reports of Shire weighing up bids for several other companies, including BioMarin Pharmaceuticals Inc and Ironwood Pharmaceuticals Inc, and in June, the Times newspaper reported that Shire was preparing a GBP12 billion offer for Swiss peer Actelion.
By Sam Unsted; [email protected]; @SamUAtAlliance and Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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