Takeover fever is set to grip the pharmaceutical sector once again this week with London-listed Shire poised to begin formal takeover talks with US rival Baxalta in a deal that could top $30bn (£20bn).
The industry has been a hotbed of activity in recent months with the Anglo-Irish drug company Shire almost merging with AbbVie last year and AstraZeneca seeing off the advances of Pfizer.
However, FTSE-100 Shire is now understood to be close to re-opening talks with Baxalta, less than a month after an initial $30bn bid was rejected by the US company.
Shire shocked the City last week by going public on its offer for Baxalta, which it claims would create the world’s leading rare diseases specialist and generate $20bn in product sales by 2020. At the time, Shire admitted that Baxalta had “declined to engage in substantive discussions regarding the proposal” which was first made on 10 July.
“The combined entity would have the opportunity to create significant shareholder value in one of the most attractive and fastest-growing segments in healthcare,” Shire’s chief executive, Flemming Ornskov, said last week. “Together, the companies would be projected to deliver $20bn in product sales by 2020, with the financial and operational firepower to fuel further innovation and growth in rare diseases.”
Despite Baxalta spurning initial advances, it is understood that Mr Ornskov and his chairman, Susan Kilsby, have spent the past few days crossing the Atlantic and meeting its rival’s shareholders, who are warming to the idea of a multibillion-dollar tie-up.
However, in order to re-open talks Shire will need to increase its offer beyond $30bn. Baxalta has only been a public company since 1 July after being spun off by Baxter International last month.
Shire’s previous £55bn talks with AbbVie ended last year after US authorities moved to crack down on so-called “tax inversion” deals. The US Treasury introduced rules banning US companies taking over foreign businesses in order to move their tax domiciles overseas and cut their tax bill. AbbVie was forced to pay a $1.6bn break fee at the time.
News of a potential breakthrough in the Baxalta talks is the latest example of dealmaking in the Square Mile, which also includes Shell’s £55bn bid for BG Group and an expected £5.5bn offer for RSA Insurance by its Swiss rival Zurich.
According to reports yesterday, Zurich is planning to cut hundreds of millions of pounds from RSA’s reinsurance spending to justify its bid. Executives at both RSA and Zurich are preparing to meet their institutional shareholders in the coming days to gauge their appetite for a deal.Reuse content