Shire-Baxalta tie-up as pharmaceutical mergers continue apace
Dublin-based pharmaceuticals company Shire has agreed a $32 billion deal to buy US rivals Baxalta after six months of negotiations.
The deal, which is expected to be completed in mid-2016, will create the world's largest rare drugs maker, accounting for 65 per cent of global sales and an anticipated revenue of more than $20 billion by 2020.
Flemming Ornskov, Shire chief executive officer, said, "Our due diligence has reinforced our conviction that these companies are stronger together. 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."
He added that the latest offer was "more attractive" than the all-equity offer Shire first made to Baxalta last summer. The deal is expected to deliver about $500 million in cost savings by combining operations and head offices.
Additionally, there are likely to be significant tax savings by enabling Baxalta to take advantage of Shire's lower tax rates in Ireland.
Mr Ornskov said, "We have made all the relevant diligence and enquiries with regards to the tax-free nature of the deal and we are confident the new offer still preserves the tax free nature of deal.
"It is very important to say this deal is not about tax inversion – it's about growth and a more diversified portfolio. We will be the undisputed leader in the sector."
The deal follows a flurry of mergers in the pharmaceuticals sectors last year, headlined by the $160 billion Pfizer-Allergan deal.
Joe Stelzer, managing partner at Cavendish Corporate Finance, commented, "As with previous headline deals in big pharma, tax status has proved a focal point, as the major players juggle jurisdictions. Baxalta's effective tax rate will be significantly slashed thanks to the deal.
"The bigger picture for Shire is the need to diversify away from an uneven pipeline of products towards a new emphasis on rare diseases and biotech – the modus operandi being the frenetic pace of acquisitions that has become commonplace across global big pharma."
The combined workforce of the new company will be 22,000: 16,000 from Baxalta and 6,000 from Shire, although there will be some job losses where operations overlap. The combined firm will have a presence in more than 100 countries.
Baxalta chief executive Ludwig Hantson said, "We bring to Shire a strong portfolio and pipeline of market-leading products, high-quality manufacturing capabilities and a talented global workforce that places patients at the centre of everything we do."
London-listed Shire said the deal would make it one of the leading firms producing treatments for rare diseases such as unusual blood conditions, cancers and immune system disorders. Baxalta also has a leading position in haemophilia treatments.
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