Shire ($SHPG) and Baxalta ($BXLT) are getting close to a blockbuster merger, according to reports, circling a $32 billion deal after months of public squabbling over price.
Over the weekend, Bloomberg reported the pair were nearing a handshake on cash-and-stock transaction that would value Baxalta at about $48 per share, noting that the two companies might announce a deal as early as this week. A day later, the Telegraph cited sources of its own saying the same thing, adding that the addition of a cash component to Shire's earlier all-stock offer had won over Baxalta's management.
Complicating matters, however, is Baxalta's Monday announcement that it's paying $175 million up front and up to $1.6 billion in total for the rights to in-development cancer therapies that harness the power of the immune system. The size of that deal led many market watchers to conclude that Baxalta is working to fend off Shire's interest, not preparing for a multibillion-dollar merger.Shire CEO Flemming Ornskov
Shire has been in pursuit of Baxalta virtually since the company's foundation. Baxalta spun out of Baxter ($BAX) in July and, within days, received an unsolicited, $30 billion merger offer from Shire. Shire went public with that bid in August, and Baxalta quickly dismissed it as far too cheap in the face of the company's revenue potential as an independent entity.
In the months since, Shire CEO Flemming Ornskov has repeatedly touted the purported benefits of a merger, saying the combined company would become the world's largest rare disease drugmaker and post revenue of more than $20 billion by 2020. Furthermore, thanks to Shire's Irish domicile, Baxalta's effective tax rate would fall from about 23% to roughly 16%, the company said.