Shire Chief Executive Flemming Ornskov is stepping up his campaign to get Baxalta to the negotiating table as he pushes the benefits a $30 billion takeover offer to the U.S. biotech company's shareholders.
He has a fight on his hands, with investors in newly listed Baxalta arguing he must pay more, although one person close to the Dublin-based drugmaker said there had been "encouraging feedback" from shareholders on the logic of the tie-up.
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Ornskov and Shire's chairwoman Susan Kilsby, a former mergers and acquisition banker, met Baxalta investors on both sides of the Atlantic at the end of last week and will continue the charm offensive this week.
Shares in Shire and Baxalta both rose on Monday, helped by a bullish note from Cowen analyst Ken Cacciatore, who said a takeover did not preclude an eventual acquisition of the enlarged group by a potential suitor like Pfizer.
Shire, which took the market by surprise with its move to forge the world's leading rare diseases company by buying Baxalta, also needs to reassure its own investors.
Joe Walters, senior portfolio manager at Royal London Asset Management, a top 20 investor in Shire, said buying Baxalta was riskier than its previous smaller deals but he was ready to see a bump in the all-share offer, which was worth $45.23 a share at Aug. 3 market prices.
"Around the $50 mark is what it seems management would have to up their offer to, and I think shareholders would be comfortable, or at least mildly comfortable, at that level," he told Reuters. "But I think they would start to get a little nervous if the offer went much above that price."
Rudi Van den Eynde, head of thematic global equity at European investment firm Candriam, which has exposure to both companies, was more cautious and described the proposed transaction as "somewhat negative."
"We would have preferred a deal around a new, promising investigational drug instead of this major deal that comes close to empire building," he said. "Flemming Ornskov is a hard-driving and well-respected CEO and he could make this deal work, however."
Shire needs to get Baxalta talking if its proposal is to have a chance, since the U.S. group boasts state-of-the-art defenses, with a "poison pill" that effectively stops unwanted suitors buying more than 10 percent and a hard-to-replace board.
So far, Baxalta has dismissed the offer as significantly undervaluing the business, arguing that its shares have "not yet achieved a price level that appropriately reflects the company's value and prospects." It was only spun off from Baxter International last month.
If Shire were to sweeten the offer, however, it might be open to negotiations, said one person familiar with the U.S. company.
Share price fluctuations since Aug. 3 mean Shire's offer is currently worth around $42.50.