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Shire goes hostile on Baxter spin-out Baxalta

Fresh from announcing that the company will acquire Foresight BioTherapeutics for $300m (here), Shire stepped up its ambitions to acquire the recently spun-out Baxalta, which went public earlier this summer (here). Shire originally approached the Baxalta Board of Directors earlier in July about the coming together of the the two companies, since when the Baxalta Board have been ignoring Shire’s advances, which has promoted Shire to go public with its $30.6bn all-stock offer. This hostile move is aimed at drawing out Baxalta shareholders in an attempt to push the Board to enter negotiations. Shire held an investor call today where it laid out its rationale for the deal and articulated how it would allow the company to reach a $20bn revenue company by 2020 and become the undisputed rare disease leader (here).

Baxalta, being a spin out, has some protections. As you spin out companies, like Baxter have chosen to do, you unlock value but you also often have a smaller entity which makes it easier to acquire. As such, companies often have inbuilt protections which make acquisitions more difficult to force through and increase the chance of independence. With Baxalta, they have a staggered board of director and also a poison pill which is triggered at 10%. Both of these are articulated in the Form 8-K (here). However, This is not Shire’s first rodeo and with Susan Kilsby, a former banker, as Chair of the Shire Board, they clearly have a strategy in mind to establish a pathway towards getting a deal through. This is further complicated though by the fact that the deal is an all-stock cross border deal.

Shire’s CEO, Flemming Ornskov, has shown no lack of M&A ambition since taking on the role. 12 months ago he was devising defensive strategies to prevent a purchase by Abbvie until he finally relinquished at a price that he and the board felt valued Shire at the right price. Now he has to be pursuer and persuade the Baxalta board of the deal merits.


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