Shire and Baxalta to Merge in $31 Billion Deal

After six months of courtship, Shire (NASDAQ:SHPG) and Baxalta (NYSE:BXLT) have come to a merger agreement in a deal worth approximately $31 billion. If the deal goes through, the combined companies would create a giant in the rare disease treatment industry.

Baxalta, formerly a part of Baxter International (NYSE:BAX), generates the majority of its revenue from its drug for hemophilia, Advate. In addition, the company also offers a variety of treatments for immune diseases and plasma therapies.

Baxalta refused Shire’s initial offer last summer, claiming that the offer significantly undervalued the company. Shire initially proposed an all stock deal that was worth the $30 billion.

Under the new agreement, Shire will pay $45.57 in shares and cash, totaling $31 billion. The price is a 37.5 premium to Baxalta’s share price before August’s announcement that Shire had attempted a takeover. However, based on the 30-day average of Shire’s stock, the deal’s value is closer to $47.50 per share, totaling $32 billion.

The two combined companies will generate $20 billion in sales by 2020.

Approximately one-third of Shire’s sales can be attributed to its drugs that treat A.D.H.D. The drug company is looking to expand its portfolio, and has made a number of acquisitions in recent years, focusing primarily on rare diseases. Rare disease drugs now account for roughly 40% of the company’s revenue.

The transaction is expected to be complete by the middle of 2016, and is still subject to regulatory and shareholder approval.

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Daniel Simmons