Shire Agrees to Buy Baxalta for $32 Billion

Dublin-based pharmaceutical company Shire agreed to buy cancer-drug maker Baxalta for $32 billion, the latest tie-up in a rapidly consolidating health-care sector.

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Under the deal, Baxalta shareholders will swap each share for $18 in cash and 0.1482 Shire American depositary shares. Based on Shire's closing American depositary share price Friday, the deal implies a total current value of $45.57 per Baxalta share.

The value of $45.57 represents a 37.5% premium on Baxalta's share price Aug. 3 before Shire's initial offer was made public.

Shire's first offer for Baxalta, worth $45.23 a share at the time, was made entirely in stock, as introducing cash into the deal could risk jeopardizing the tax-free status of Baxalta's recent spinoff from parent Baxter International  U.S. law requires that tax-free spinoffs not be used as a "device" to funnel cash to shareholders.

Shire said Monday that it and its tax advisor have concluded that a merger with the proposed cash consideration of $18 per Baxalta share will maintain the tax-free status of the Baxalta spinoff from Baxter.

Baxalta shareholders will have a 34% stake in the combined company.

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Shire Chief Executive Flemming Ornskov said Monday that the combined company's expanded portfolio and larger geographic presence is anticipated to drive annual revenue growth to more than $20 billion by 2020.

"Our due diligence has reinforced our belief in the combination," he said.

The combined company is expected to be the 19th-largest pharmaceutical company by sales, leapfrogging Celgene, Biogen and others, according to market-research firm EvaluatePharma.

Taxes would be one area of savings for the combined company, as corporate taxes in Ireland are generally lower than in the U.S. Shire, which has a tax rate in the midteens, is projecting a tax rate of 16% to 17% for the combined company, compared with Baxalta's current rate of about 23%.

The Wall Street Journal reported last week that Deerfield, Ill.-based Baxalta and Shire were in advanced talks.

Write to Anne Steele at