Shire to begin Baxalta bid talks despite poison pill, say reports

Shire is rumoured to be close to starting takeover negotiations with target Baxalta, just days after the US company rejected its $31bn approach.

If Shire ups its offer for the Illinois-headquartered bleeding disorders specialist, sources close to the company said Baxalta directors would be inclined to begin talks, according to the Sunday Times.

Despite transatlantic efforts of Shire chief executive officer Flemming Ornskov and chair Susan Kilsby to press the case for a deal, a source told the Telegraph that the premium on Baxalta's stock was "not even in the right ‘zip code’, when it comes to the number offered”.

Last Tuesday, Shire went public with a hostile $45.23-per-share bid, which values Baxalta at roughly $30.6bn, only a month after it completed its spin-off from Baxter International, which still holds a 19.5% stake.

Shire claimed merging the two companies would generate immediate shareholder value and accelerate both sides' growth plans.

Baxalta responded by dismissed Shire's "highly conditional" and unsolicited proposal as not making strategic sense and "significantly undervalues" the business and its prospects for growth and value creation.

In a letter to Ornskov, Baxter's own CEO Ludqig Hantson said: "we do not believe that a combination of our two companies would be strategically complementary, or that our respective product portfolios would benefit from such a combination".

Baxalta also has in place several defensive clauses aimed to stop unwanted suitors to take control, including include a "poison pill" stopping any shareholder building over a 10% stake and even any group of shareholders owning 10% in total from banding together to take over the company, not to mention Baxter's significant stake.

The tax advantages of a combination remain compelling for the US company's board and shareholders, as althogh Shire receives most of its revenues from the US, its headquarters in Ireland mean it and its shareholders pay lower tax.

Shire said the merger will yield 10%-plus internal rates of return and earnings per share accretion after the first year of the proposed deal’s close.