Shire Plc (NASDAQ: SHPG) agrees to buy Baxalta (NYSE: BXLT) for about $32 billion on Monday after its six months pursuit, making the combined company a giant in treating rare diseases.
Dublin-based Shire agreed to offer $18 in cash and 0.1482 of Shire’s American depositary receipts for each Baxalta share held. Based on Shire’s closing share price on January 8, 2016, Baxalta share will have an implied valuation of $45.57 per share. This offer price represents a 37.5 percent increase to Baxalta’s price on Aug.3, the day before Shire announced the initial offer.
Baxalta is a biopharmaceutical company that develops, manufactures and commercializes therapies for orphan diseases and underserved conditions in hematology, oncology and immunology.
Adding Baxalta’s products will help Shire expand its market share in rare-disease treatments. According to market researcher EvaluatePharma, the rare-disease treatments market will grow by more than 60 percent to $176 billion over the next five years. Shire expects the combined company will generate more than $20 billion in annual revenues by 2020.
The acquisition will bring huge tax benefit to the combined company. U.S. drug companies are expected to have a tax rate of 23 percent in 2016. Because Shire is based in Dublin, so the combined company will have a much lower effective tax rate of 16 percent to 17 percent by 2017.
"Together we will have the number one platform in rare diseases with a strong foundation for future growth," Shire Chief Executive Officer Flemming Ornskov told reporters.
Baxalta shares are trading down 1.45 percent to $39.43 at 3:53PM EST. Shire ADR shares are down 8.43% percent to $170.35 at 3:55PM EST.