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Shire finally ties up US$32bn Baxalta deal

Two drug groups to merge to create a rare disease specialist
Shire finally ties up US$32bn Baxalta deal
Baxalta shareholders will hold about 34% of the combined company following the deal

Drug group Shire (LON:SHP) has finally succeeded in its bid to merge with US rival Baxalta in a US$32bn deal.

Shire said the boards of the two companies had agreed a potential transaction whereby Baxalta shareholders will receive US$18 in cash and 0.1482 Shire American depositary shares (ADS) per Baxalta share.

The UK-listed drug group, which first tried to buy Baxalta last year but had its US$30bn all-share offer rejected on the grounds that it was too low and lacked a cash element.

Shire chief executive Flemming Ornskov said: "This proposed combination allows us to realize our vision of building the leading biotechnology company focused on rare diseases."

Baxalta chief executive Ludwig Hantson, said: "Today’s announcement marks a new path forward for our organization and is a testament to the significant progress we have made in achieving our strategic business priorities."

The tie-up will create a global specialist in areas including haematology, immunology, neuroscience, lysosomal storage diseases, gastrointestinal/endocrine conditions and hereditary angioedema (HAE).

Baxalta shareholders will hold about 34% of the combined company following the deal, which is set to close in the middle of this year.

The combined group is expected to have a market capitalisation approaching that of AstraZeneca's (LON:AZN) £54.9bn.

Responding to recent controversy about US companies allegedly doing deals to avoid tax, Ornskov said the merged company would have a combined tax rate of between 16%-17%.

"It's important to say this is not about tax - it's about growth and creating a leader in rare diseases," he said.

Shire expects to save more than US$500mln annually in the first three years after the deal through eliminating duplication, increasing efficiency and using the combined muscle of the two groups to get better deals.

Shire has been rumoured to be eyeing smaller deals such as the potential acquisition of US osteoporosis specialist Radius Health (NASDAQ:RDUS).

Ornskov said Shire would remain on the lookout for good deals, but said the short-term focus would be on integration with Baxalta and paying off debt.

"Our due diligence has reinforced our conviction that these two companies are stronger together," he said. Shares in Shire rose 46p, or 1.1%, to 4323p at lunchtime in London.


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