11th Jan 2016 12:58
LONDON (Alliance News) - Shire PLC on Monday announced its much-awaited acquisition of US peer Baxalta Inc, in a deal that values Baxalta at around USD32 billion and which will involve both a cash and shares portion within the consideration.
Shire will pay USD18.00 in cash and 0.1482 Shire American depositary shares per Baxalta share. Based On Shire's closing ADS price last Friday this implies a total current value of USD45.57 per Baxalta share, Shire said, giving the deal a total value of around USD32.0 billion.
This is a premium of around 37.5% to Baxalta's share price on August 3, when Shire announced its initial offer for Baxalta. Shire had initially made an offer for Baxalta, which was spun-off from US medical group Baxter International Inc only in July 2015, which valued the company at around USD30.0 billion.
Baxalta, however, rebuffed the USD30.0 billion offer as "significantly" undervaluing the business and suggested a merger at such an early stage in the company's existence would be "severely disruptive".
Shire said Monday the acquisition would provide it with a combined portfolio with an expanded range of therapeutic areas, with more than 60 programs in development, and it expects more than 30 recent and planned product launches from this pipeline, contributing around USD5 billion in yearly revenue by 2020.
Shire expects to realise more than USD500.0 million in cost synergies, to be achieved in the first three years post the acquisition closing. The acquisition is expected to add to non-GAAP diluted earnings per share in 2017, its first full calendar year of ownership, and beyond. The combined company is expected to generate an annual operating cash flow of USD6.0 billion, beginning in 2018.
Importantly, the Shire expects to have a combined non-GAAP effective tax rate of 16-17% by 2017, and said that having conducted additional tax due diligence, it has concluded that the acquisition will maintain the tax free status of the Baxalta spin-off from Baxter.
Shire will fund the acquisition through a new USD18.0 billion, fully underwritten bank facility.
The acquisition is subject to approval from shareholders, along with some regulatory approvals and some other conditions. It is expected to close in mid-2016.
"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 USD20 billion in anticipated annual revenues by 2020," said Shire Chief Executive Flemming Ornskov in a statement.
"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," said Baxalta Chief Executive Ludgwin Hnatson in a statement.
Shares in Shire were up 2.9% at 4,400.00 pence following the announcement Monday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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