It took a few months, but Shire ($SHPG) has wrapped a $32 billion deal to acquire Baxalta ($BXLT), providing CEO Flemming Ornskov with the big merger that he has been promising investors.
Shire is paying $18 a share plus stock to bag Baxalta in a pact that is worth a total of $45.57 for a share of Baxalta. The deal arrives right on schedule, in a manner of speaking, giving Shire bragging rights to a major buyout as it looks to convince investors of the bright future that lies ahead.
The deal gives Shire an instant pipeline makeover, with franchise operations that extend from hematology to immunology, neuroscience, lysosomal storage disorders and more. The combined company will generate 65% of its revenue from drugs that target rare diseases. To help cover the cost, Shire is anticipating that it can carve out more than $500 million in costs once the merger is complete.
Shire's Ornskov has pursued a quiet but persistent campaign to complete this deal, first revealing a $30.6 billion offer all the way back in early August of 2015. And he managed to wrap it up without forking over a huge premium to the original offer. Still, some analysts were quick to conclude that Shire was paying a heavy price for the deal.
"The deal is not cheap," noted Bernstein's Ronny Gal. "This should come as no surprise. Both Shire and Baxalta agree that the long term future of Baxalta is favorable and reasonably divided the synergies created between the two sides. As consensus is assuming larger risk to the Baxalta hemophilia business than either management teams, the deal look(s) expensive."
That sentiment helped drive the value of Shire's stock down more than 2% in early trading.
Baxalta, meanwhile, has been wheeling and dealing since it split off from Baxter ($BAX) last summer. Just days ago the company, which has been setting up R&D operations in Cambridge, struck a $1.6 billion deal with Symphogen to collaborate on a checkpoint cancer drug development pact. That pact included a $175 million upfront.
The buyout will get biopharma M&A off to a hot start in 2016, with the huge Pfizer ($PFE)/Allergan ($AGN) megamerger still in the works. Depending who you talk to, a total of $4 trillion to $5 trillion worth of M&A activity occurred in the U.S. last year, and a number of analysts expect that trend to remain a big factor in the pharma industry.
For Shire, though, this deal is about establishing the company as a leader.
"This proposed combination allows us to realize our vision of building the leading biotechnology company focused on rare diseases," noted Ornskov in a statement. "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 $20 billion in anticipated annual revenues by 2020. Our due diligence has reinforced our belief in the combination, and we look forward to welcoming Baxalta colleagues to a shared entrepreneurial, patient-driven culture."
- here's the release
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