Shire ($SHPG) has refused to give up on target Baxalta ($BXLT), which first rejected it 5 months ago. And its persistence may finally be paying off.
The two drugmakers are in takeover talks that include a sweetened buyout offer, Bloomberg reports, though no final decision has been made. Baxalta has been holding out for a higher offer with a cash component since it shot down Shire's $30 billion, all-stock bid over the summer, sources told the news service.
Shire initially structured the bid as all-stock in order to keep the tax benefits of Baxalta's July spinoff from parent Baxter Labs ($BAX) intact--and that spinoff itself was another reason the Illinois pharma wasn't interested in joining up with the Irish drugmaker.
|Baxalta CEO Ludwig Hantson|
As CEO Ludwig Hantson told investors in August, Baxalta--a brand-new company--hadn't had time to see its growth strategy play out.
And on top of that, he considered Shire's offer a "lowball" bid that wouldn't "generate substantial operational or revenue synergies."
Shire, of course, has billed the possible transaction differently, talking up the pair's potential as a global leader in rare diseases. A combined company could generate $20 billion in sales by 2020, with as many as 30 new drugs rolling out over the next 5 years, it says.
But there's more in it for Baxalta, too. A takeover by Dublin-based Shire would lower Baxalta's taxes--the same benefit that helped spur a recent megamerger agreement between Dublin's Allergan ($AGN) and New York's Pfizer ($PFE). Baxalta's projected tax rate next year is 23%, while a Shire combo would yield an effective rate of between 16% and 17%, Bloomberg notes.
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