Shire, the London-listed drugs company, has agreed to buy Baxalta $32bn (£22bn) after receiving assurances that it will not face a big tax bill in the US by including cash in its bid.
Shire, which is based in Dublin and managed in Boston, appealled to Baxalta’s shareholders to push for a deal after the board of the rare disease specialist turned down an approach worth $45.32 per share.
The agreed deal, increased with a large cash element, is the latest takeover in the pharmaceuticals industry as companies with older drugs seek to acquire the next generation of profitable medicines.
Baxalta develops treatments for rare blood conditions, cancers and immune system disorders. The deal will advance the desire of Shire, best known for hyperactivity treatments, to broaden its range of rare disease treatments.
Shire expects to save more than $500m of costs within three years of the deal completing. It predicted revenue gains and said the combined company would pay a tax rate of 16-17% by 2017. The deal has been delayed amid doubts over whether Shire could include cash without facing a hefty charge.
Baxalta split from Baxter, the US medical group, last year and was initially concerned that accepting a cash offer too soon after being spun off could violate US rules designed to prevent spinoffs from being used to dodge taxes.
Under the terms of the deal, Shire will pay Baxalta shareholders $18 in cash and 0.1482 Shire American depositary receipt per share. The implied $47.50 price is 37.5% higher than Baxalta’s share price on 3 August before an initial all-share offer by Shire was announced.
Shire said: “Shire has conducted additional tax due diligence, and based on this diligence, Shire and its tax adviser 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.”
Tax has been an important element in the success or failure of cross-border deals between drugmakers. A proposed $54bn takeover of Shire by Abbvie collapsed in 2014 after a political backlash in the US against American companies moving headquarters abroad for tax reasons.
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