Pharma Deal: Shire To Buy Baxalta For $32 Billion

Drugmaker Shire clinched its six-month pursuit of Baxalta International Inc. Monday with an agreed $32 billion cash and stock offer, catapulting it to a leading position in treating rare diseases.

The London-based group, which first approached the U.S. firm with an all-stock offer in July, won over the maker of treatments for rare blood conditions, cancers and immune system disorders after adding a cash sweetener.

Shareholders will receive $18 in cash and 0.1482 Shire American depositary shares per Baxalta share, implying a total value of $45.57 per share based on Jan. 8 prices.

The deal marks a strong start to mergers and acquisitions in healthcare in 2016 after the sector saw its biggest dealmaking streak in history last year, with global deals totaling $673 billion, according to Thomson Reuters data.

Bannockburn, Illinois-based Baxalta, which was spun off last year from Baxter International, rejected Shire's previous $30 billion all-stock offer in August, arguing it significantly undervalued the company.

But Shire Chief Executive Flemming Ornskov relentlessly pursued Baxalta, seeking to pressure it into agreeing to a deal by meeting with Baxalta's major shareholders over a period of months.

That enabled it to sidestep a hostile deal in which it would have faced takeover defenses, including a "poison pill" that would have stopped unwanted suitors from buying more than 10 percent of the company and a hard-to-replace board.

Ornskov added cash and raised the offer price to offset the loss of a tax benefit shareholders would have received if the company remained independent.

Together, the two companies said they expected to deliver double-digit sales growth, with more than $20 billion in annual revenue by 2020.

With annual operating costs of over $500 million, additional revenue and tax benefits from Shire's Irish domicile, Shire said it expected the transaction to boost non-GAAP diluted earnings from 2017.

The offer price compares with Baxalta's price of $32.58 Aug. 3, before Shire went public with its interest in the company.

Shire was advised by Evercore, Morgan Stanley, Barclays and Deutsche Bank. Baxalta was advised by Goldman Sachs and Citigroup.

Reuters had reported last week that Shire and Baxalta could announce a deal as early as Monday.