Shire has proposed an all stock transaction in which each Baxalta share would be exchanged for “0.1687 Shire ADRs. The proposal implies a value of $45.23 per Baxalta share and represents a significant premium of 36% over Baxalta’s stock price as of August 3, 2015”. Baxalta, which has traded as low as $29.83 is up sharply today, recently trading at $38.84. This is still a far cry from the value of the proposed deal, implying that investors see a low likelihood of the deal coming to fruition. Most of the deal’s financial savings would come from tax benefits- Shire is based in Ireland.
One major concern for Baxalta and its shareholders must be the tax free status of its spinoff. Shire insists that “[t]he proposed transaction would be structured as an all-stock transaction to maintain the tax-free nature of Baxalta’s July 1, 2015, spinoff from Baxter. Baxalta shareholders would own approximately 37% of the combined Shire group”
There has been no public response from Baxalta, but Shire seems willing to raise its bid in a negotiated agreement. Other potential acquirers may be waiting in the wings, spurred to action by Shire’s bid, or Baxalta may find a white knight. All in all, much excitement for a company that is barely one month old.
Disclosure: The author holds no position in any stock mentioned.