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The Shire-Baxalta Merger: A Look at the Details

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Baxalta’s history

Based in Bannockburn, Illinois, Baxalta (BXLT) is a leading global biopharmaceutical company that was founded on July 1, 2015. The company was formed through a spin-off from healthcare giant Baxter International (BAX). Prior to the spin-off, it was Baxter’s biopharmaceutical division.

On August 4, 2015, Baxalta’s press release confirmed Shire’s (SHPG) takeover interest in Baxalta as a “highly conditional, unsolicited proposal to acquire all of the outstanding common shares of Baxalta in an all-stock transaction.” Baxalta shareholders would receive 0.17 Shire ADRs (American depositary receipts) for each Baxalta share. The same proposal had been received by the company on July 10, 2015. However, with the board’s conclusion of significant undervaluation of the business, the proposal was declined.

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Shire-Baxalta merger

It took six months for Shire to persuade Baxalta. Finally, on January 11, 2016, Baxalta agreed to be acquired by Shire for cash and ADSs (American depositary shares). According to the agreement, “Baxalta shareholders will receive $18.00 in cash and 0.1482 Shire ADS per Baxalta share. Based on Shire’s closing ADS price on January 8, 2016, this implies a total current value of $45.57 per Baxalta share, representing an aggregate consideration of approximately $32 billion. The exchange ratio is based on Shire’s 30-day trading day volume weighted average ADS price of $199.03 as of January 8, 2016, which implies a total value of $47.50 per Baxalta share.”

Post-acquisition, Baxalta would become a wholly owned subsidiary of Shire. Following this merger news, Baxalta’s share price rose and Shire’s share price fell. For discussion on the share price movement of these two companies, please refer to Why Did Shire Fall after Shire-Baxalta Acquisition Announcement?

In the hemophilia space, Baxalta competes with Biogen (BIIB) and Pfizer (PFE). It is often risky to directly invest in a pharmaceutical or biotechnology company, as any news release for the success or failure of a drug results in volatility in the stock price. Therefore, to remain on the safer side, investors could opt for the SPDR S&P 500 ETF (SPY), which has 0.15% of its total holdings invested in Baxalta stock. In the next part of this series, we’ll look at Baxalta’s performance, geography-wise.

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