After some serious pushback from Baxalta ($BXLT), Shire ($SHPG) is weighing options when it comes to sweetening its $30.6 billion bid for the company. But it's not even sure how to go about doing it.
|Baxalta CEO Ludwig Hantson|
The Dublin drugmaker is considering getting cash to shareholders sooner, The Wall Street Journal's sources say. The company had said it would return cash to Baxalta's shareholders by starting a buyback "promptly after" sealing an all-stock deal for its target, which is newly spun off from parent Baxter ($BAX).
But it'll have to figure out a way to do that without compromising the spinoff's tax-free status, which is a key point for shareholders, sources told the paper. And with few examples of companies being snatched up so quickly after a spinoff, there's not necessarily a clear-cut path.
As tax experts told the WSJ, Baxalta agreeing to take out a loan to pay a special pre-deal dividend could be an option.
But with Shire's recent stock price drop, it may need to improve its offer further if it wants to make things happen at all. Baxalta has already repeatedly shunned the bid, calling it too low--even before the 17% plunge.
"We have an attractive set of franchises and it would be a shame to hand it over for a lowball valuation," Baxalta CEO Ludwig Hantson said on a call last month with shareholders.
That's not the company's only problem with Shire's offer, either. Baxalta doesn't see the rationale for pairing up, drawing a line between its flagship hemophilia drugs and the other rare diseases Shire has recently doubled down on. Plus, Baxalta insists it hasn't had time to realize its full potential, with Shire's approach coming so soon after it went solo.
Deal-hungry Shire, on the other hand, is touting the potential for savings--including the tax benefits it could bring with its Irish address. And some analysts don't seem to have a problem with its timeline in regards to the young company.
The deal is "value-creating and appropriately aggressive," Cowen & Co. analyst Ken Cacciatore wrote in an August note to clients.
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