Shire-Baxalta takeover drama barreling towards its final act
- Shire is close to a decision on its troubled attempt to acquire Baxalta. It may either quickly strike a deal, or walk away entirely, according to a report from the Wall Street Journal.
- In August, Shire offered to acquire Baxalta in an all-stock deal worth $30.6 billion. Baxalta emphatically declined and has rejected two further offers.
- Existing U.S. tax laws make any deal including cash challenging, because Baxalta's spin-off from Baxter International has tax-free status. But, with Shire's stock down 24% since August, an all-share offer is not as enticing as it once might have been.
It looks like Shire's CEO, Flemming Ornskov, may be running out of patience with the troubled pursuit of Baxalta.
Although Ornskov has cited the tremendous potential of synergizing the two companies' portfolios, he doesn't have many more avenues to improve Shire's bid. With Shire's stock falling in value, there has been pressure to add cash to the offer in order to make any deal more attractive to Baxalta's board.
However, US law makes that difficult, because tax-free spin-offs cannot be used to provide cash to stakeholders. Additionally, Shire's shareholders most likely would want a cash infusion in order not to dilute the value of their shares.
Assuming the deal happen, it's not necessarily a surefire win, given the increasing potential competition Baxalta's hemophilia products face from Roche's late-stage candidate ACE-910.