The unsolicited, cashless bid offered to purchase all Baxalta stock for 0.1687 Shire shares each. It is the second tender since Shire’s private offer to Baxalts’s management on July 10.
Baxalta’s board said both offers undervalue the nascent company, which went public on the New York Stock Exchange on July 1, 2015 after spinning out from Baxter.
“The Board today reaffirmed its conclusion that Shire’s proposal significantly undervalues Baxalta and its attractive prospects for growth and value creation, and that a merger at this time would be severely disruptive at this very early stage of Baxalta’s existence as a public company and presents a significant and real risk to value creation for our shareholders,” said Chairman Wayne Hockmeyer this week.
Baxalta CEO Ludwig Hantson rejected the first offer in a letter to Shire head Flemming Ornskov on July 31, saying his company’s growing infrastructure and manufacturing operations make it a strong prospect for shareholders.
“As a new, publicly-traded entity only since July 1, we are just in the initial stages of implementing our growth strategy as a standalone company and our stock has not yet achieved a price level that appropriately reflects the company’s value and prospects.”
Hantson added he believes a merger would not produce substantial operational or revenue synergies, saying the companies’ product portfolios are too different, and it was a bad time to disrupt manufacturing and R&D programmes. The company has production sites in the US, Europe, and Singapore and headquarters in Deerfield, Illinois.
Baxalta’s shareholder agreement has a “poison pill” provision which arms against hostile takeovers and prevents investors forming a negotiating block with more than 10% of shares.
A fund manager invested in Baxalta said Shire’s next option will be to increase its offer to over $50 a share, from the $45.23 per share this week’s offer was worth.
"You know that they will have to increase and you know that any increase has to be substantial,” the expert told Reuters. "It’s not completely clear that would get it done but it would make it much more achievable. It will be harder for the board to turn around and say that’s not fair value."
"You've also got the potential of somebody else coming in," he added.
Baxalta also advised shareholders on Thursday to reject a mini-tender by private firm TRC Capital Corporation offering to purchase up to 3m shares – about 0.44% of Baxalta’s stock – at $35.45 per share. The offer is lower than market price, which was $ 37.39 at close of day on August 6.
Mini-tenders are designed to acquire less than five per cent of a company’s shares, the limit beyond which the deal is scrutinised by the US Securities and Exchange Commission.
“Some bidders make mini-tender offers at below-market prices, hoping that they will catch investors off guard if the investors do not compare the offer price to the current market price,” the SEC previously commented.