New Pharma Giant Already in Play as Shire Takes Aim: Real M&A
2015-08-04 16:02:31.833 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Shire Plc makes $30 billion bid for -- wait,
what’s Baxalta?
That was probably the reaction most had to Shire’s
announcement Tuesday because Baxalta Inc. is technically only
one month old. It’s the drug division that was spun off from
medical-products maker Baxter International Inc. in July. It
could now end up being the shortest-lived pharmaceutical giant.
Shire, emerging as a major dealmaker in the industry,
wasted no time, and its pursuit of Baxalta probably won’t end
here. The $50 billion company said it made its all-stock bid
public after Baxalta’s leadership wasn’t willing to engage in
merger talks.
“It was quite a quick bid,” said Jonathan Morgan, an
analyst for The Edge, a research firm that analyzes spinoffs and
special situations. “We think there’s going to be a little bit
of back and forth, and we’ll have to see how this plays out.”
It’s understandable that Baxalta would want to see how its
brand-new stock performs. Health-care spinoffs tend to do better
than those in any other industry, delivering an average return
of 45 percent in the first year after the separation, according
to a study by The Edge and Deloitte.
Even so, analysts were forecasting that Baxalta shares
would trade for only about $36 apiece in a year. That’s only 16
percent higher than its closing price on its first day of
trading.
Shire’s offer was worth $45.23 a share upon announcement,
and about $42 even after the Dublin-based suitor’s American
depositary receipts slid Tuesday.
Shire Suitors
Shire itself has been considered a target for Allergan Plc
or Pfizer Inc., and the company’s bid for Baxalta could be a way
to fend off suitors. That said, a purchase of Baxalta could just
make Shire an even juicier prize.
Baxalta’s shares are surging, a sign its shareholders like
what they see even if management doesn’t. Shire, which is
increasingly focused on rare-disease treatments, is tempting
them with a fair premium, cost savings and a low tax base.
The hurdle will be Baxalta’s staggered board structure,
which makes an overhaul more difficult.
Shire is also constrained in how it can improve its offer,
should it need to. The bid is currently structured as all stock
to avoid incurring taxes related to Baxalta’s spinoff, which
wasn’t taxed at the time. Therefore, Shire -- or any other
bidder -- probably couldn’t sweeten its offer by adding cash,
which investors usually prefer.
Valeant Pharmaceuticals International Inc.’s long, drawn-
out chase of Allergan last year kept investors busy. In the end,
Valeant didn’t win, but Allergan still got bought. Could this be
the sequel?
For Related News and Information:
Shire Seeks to Cajole Baxalta Into Talks With $30 Billion Offer
The $100 Billion Deal Is Still Out There for Pharma: Real M&A
Shire Hunt for Next Target Spotlights PTC to Synageva: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Crayton Harrison
2015-08-04 16:02:31.833 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Shire Plc makes $30 billion bid for -- wait,
what’s Baxalta?
That was probably the reaction most had to Shire’s
announcement Tuesday because Baxalta Inc. is technically only
one month old. It’s the drug division that was spun off from
medical-products maker Baxter International Inc. in July. It
could now end up being the shortest-lived pharmaceutical giant.
Shire, emerging as a major dealmaker in the industry,
wasted no time, and its pursuit of Baxalta probably won’t end
here. The $50 billion company said it made its all-stock bid
public after Baxalta’s leadership wasn’t willing to engage in
merger talks.
“It was quite a quick bid,” said Jonathan Morgan, an
analyst for The Edge, a research firm that analyzes spinoffs and
special situations. “We think there’s going to be a little bit
of back and forth, and we’ll have to see how this plays out.”
It’s understandable that Baxalta would want to see how its
brand-new stock performs. Health-care spinoffs tend to do better
than those in any other industry, delivering an average return
of 45 percent in the first year after the separation, according
to a study by The Edge and Deloitte.
Even so, analysts were forecasting that Baxalta shares
would trade for only about $36 apiece in a year. That’s only 16
percent higher than its closing price on its first day of
trading.
Shire’s offer was worth $45.23 a share upon announcement,
and about $42 even after the Dublin-based suitor’s American
depositary receipts slid Tuesday.
Shire Suitors
Shire itself has been considered a target for Allergan Plc
or Pfizer Inc., and the company’s bid for Baxalta could be a way
to fend off suitors. That said, a purchase of Baxalta could just
make Shire an even juicier prize.
Baxalta’s shares are surging, a sign its shareholders like
what they see even if management doesn’t. Shire, which is
increasingly focused on rare-disease treatments, is tempting
them with a fair premium, cost savings and a low tax base.
The hurdle will be Baxalta’s staggered board structure,
which makes an overhaul more difficult.
Shire is also constrained in how it can improve its offer,
should it need to. The bid is currently structured as all stock
to avoid incurring taxes related to Baxalta’s spinoff, which
wasn’t taxed at the time. Therefore, Shire -- or any other
bidder -- probably couldn’t sweeten its offer by adding cash,
which investors usually prefer.
Valeant Pharmaceuticals International Inc.’s long, drawn-
out chase of Allergan last year kept investors busy. In the end,
Valeant didn’t win, but Allergan still got bought. Could this be
the sequel?
For Related News and Information:
Shire Seeks to Cajole Baxalta Into Talks With $30 Billion Offer
The $100 Billion Deal Is Still Out There for Pharma: Real M&A
Shire Hunt for Next Target Spotlights PTC to Synageva: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Crayton Harrison