Baxalta sounds out rivals as it weighs up Shire deal
Baxalta is sounding out potential alternatives to a takeover by Shire even as the US biotech company remains open to a deal with its UK-listed suitor.
People familiar with the matter said Baxalta was contacting other drugmakers that might be interested in making an offer to maximise its options.
No other bids have so far been received but the US company — spun off from its parent group, Baxter, in July — wants to ensure there are no better deals available before agreeing a tie-up with Shire.
However, these people said Baxalta had narrowed its differences with Shire since rejecting the latter’s $30bn hostile approach in August and Shire had not given up hope of securing its target before the end of the year.
The push for agreement could mark a final burst of action in a record year of dealmaking across the pharmaceuticals sector; more than $550bn of transactions have been announced so far, according to Dealogic, greater than the past two full years combined.
People close to the situation stressed that the outcome remained in the balance and talks could yet break down. But the chances of a deal have been boosted by Shire’s willingness to sweeten its offer with cash in a climbdown from its earlier insistence on an all-stock transaction.
Shire previously believed it would face a prohibitive US tax penalty related to Baxalta’s spin-off from Baxter if it paid with cash.
However, people familiar with the situation said this was no longer seen as “a black and white matter” after Shire received advice that there may be a way to introduce a cash component without triggering a big tax bill.
Ronny Gal, analyst at Bernstein, speculated that a deal could be struck at $52 per share with 30 per cent in cash, valuing Baxalta at about $35bn. The stock closed at $38.06 on Monday.
Other analysts cited Sanofi of France and AbbVie of the US among the companies that Baxalta might seek to draw into a bidding contest. But they said Shire could offer cost advantages related to its low-tax base in Ireland that might make it hard to compete against.
Shire has faced an uphill struggle since making its approach in the face of resistance from the US company and scepticism from its own shareholders. The Dublin-based company has seen its shares fall more than 20 per cent since August — sharply reducing the value of its initial proposal.
The decline reflects a broader sell-off in the biotech sector and doubts over the strategic rationale for buying Baxalta.
Flemming Ornskov, Shire chief executive, has argued the proposed deal would benefit both companies by creating the world’s biggest rare disease specialist, with projected annual sales of $20bn by 2020.
It would be by far the largest deal to date in Shire’s transformation from niche pharma company focused on treatments for attention deficit hyperactivity disorder into a top-tier biotech group.
Shire and Baxalta declined to comment.