Shire Plc, the drug maker, has finally completed a $32 billion deal to buy Baxalta International Inc. which has helped it move back into the leading position as far as treating rare diseases is concerned.
This group, listed in London, had approached this US Company in July with an all-stock offer but were only able to win them over when they added a cash offer to the deal as well.
Shire’s shares were down by more than 8% though since investors were worried about the competitive threat posed by Roche with regard to the hemophilia franchise of Baxalta as well as the fact that the price offered and cost savings forecasted were disappointing.
This deal does mark a strong start to 2016 for the healthcare sector with regard to mergers & acquisitions fresh off the largest ever deal making streak in 2015 with global transactions worth $673 billion.
This deal also highlights how appealing rare disease medicines which target smaller groups of patients are since drug makers can charge quite a bit for them.
Shareholders are going to receive $18 cash and a 0.1482 stake in Shire for every Baxalta share. This works out to a value of around $45.57 per share as of prices on Jan 8.
This is 37.5% higher than Baxalta’s price as on Aug 3 before Shire’s interest was made public.
Baxalta had earlier rejected a $30 billion offer from Shire saying it was significantly undervaluing the company.
But Shire pursued relentlessly and tried pressuring them into a deal by meeting with all their major shareholders over the last few months.
The deal may be announced by Monday with Baxalta shares currently down 2.6% at $38.96 as of Monday afternoon.
Initially, Shire offered just stock because they were concerned that the cash element may just hamper the tax-free status of the Baxter-Baxalta spin-off. But they are now confident that this $18 cash is going to still keep them in that tax free category.
The companies have said that they expect sales growth to be in double digits with annual revenues crossing $20 billion by 2020.