Drugs group Shire makes $30bn takeover bid for US rival Baxalta

Shire joined the latest wave of deal-making in the pharmaceuticals industry, launching a $30bn (£19bn) hostile takeover bid for its US rival Baxalta.

Shares in the Dublin-based but London-listed drugs group, best known for its ADHD treatment Adderall, fell nearly 6 per cent to 5,395p while Baxalta jumped 14 per cent in afternoon trading in New York.

Shire’s decision to go direct to shareholders comes after Baxalta’s board declined to enter merger talks at the end of last week. The US biotech firm, which specialises in treatments for rare blood conditions such as haemophilia, was spun off last month from Baxter International, which remains its largest shareholder with a 19 per cent stake.

Shire said the combined companies could generate $20bn of sales by 2020. The new group, of which Shire shareholders will own 63 per cent, will “create the leading global biotech company focused on rare diseases”, it added. It also played on its projected 2017 corporation tax rate of 16-17 per cent as a sweetener to Baxalta’s shareholders.

Flemming Ornskov, Shire’s chief executive, said the proposed offer “would be strategically and financially attractive to both our companies, accelerating our respective growth ambitions.” Baxalta’s directors seem unconvinced, though, having “declined to engage in substantive discussions regarding the proposal”.

Shire’s all-stock offer represents a premium of 36 per cent to Baxalta shareholders, who will receive 0.1687 Shire American Depository Receipts per share, worth $43.23 per share based on Shire’s current market value.

The pharmaceuticals industry is in the midst of a record-breaking year for mergers and acquisitions. According to the management consulting giant KPMG there have already been $221bn deals in the sector this year, three times as many as were completed in the first half of 2014.

The huge growth in deal making in 2015 appears to be linked to a handful of failures of 2014: Shire itself agreed to a $54bn bid from its American rival AbbVie only for the latter to get cold feet and pull the plug on the deal in October, citing negative tax implications. Pfizer also pulled out of its unsolicited $118bn bid for AstraZeneca in May 2014.

A former Nasdaq-listed pharmaceutical services company executive, who declined to be named, said: “The pharmaceutical industry is good at marketing but less good at research nowadays, partly because smaller companies are more nimble and are less restrained by big pharma committees and bureaucracy, which can crush research and development.

“Scientists know the only way to get rich is through equity not salary, so the best and brightest will continue to set up on their own outside the constraints of big pharma.”