By Zachary Laubernds,
Money and Investing Writer
On Jan. 17, Dublin based biopharmaceutical giant Shire PLC (NASDAQ: SHPG) announced the acquisition of Baxter International’s (NASDAQ: BAX) spin off biopharmaceutical company, Baxalta (NASDAQ: BXLT), for a price tag of $35 billion.
Baxalta broke off of from Baxter International in July of 2015.
In its 5 months of independent operation Baxalta brought in about $6 billion.
This acquisition comes amid growing concerning of corporate tax policies and economic growth on Capitol Hill.
There has been an increasingly high amount of mergers and acquisitions in the past few years that have an aim of moving company headquarters outside of the United States for tax breaks.
Although the IRS has refused to comment on the recent moves by the Irish pharmaceutical company, but here is a general belief that there have been efforts recently within the IRS to prevent moves that grant U.S. corporations tax breaks if they are acquired by international company.
With this move the new Shire-Baxalta company would have a tax rate of around 16 percent, that’s 7 percent lower than independent Baxalta’s rate was this past year.
This merger will make Shire-Baxalta the world’s largest producer of pharmaceuticals for rare diseases.
This deal has been in the workings since August, just a month after Baxalta spun off from Baxter International, and has some very unique terms.
In most large acquisitions of public corporations, it is normal for the acquiring corporation to compensate the shareholders of the corporation that’s being acquired with either cash or stock in the new company.
This deal, on the other hand, offers both. Not only will Shire be paying $18 per share of Baxalta being bought out, but they will also be giving away 38 percent of the combined corporation’s new shares to current Baxalta shareholders.
This is the first deal of this kind for a tax-exempt spin off corporation like Baxalta.
Corporations like these are normally just bought out through cash options, but Baxalta’s earning potential has given it the ability to negotiate more lucrative terms for its shareholders.
International mergers and acquisitions are rarely this impactful on an industry, so it will be interesting to see how this move effects the pharmaceutical industry.
In today’s globalized economy moves this large can have a huge impact on the world economy, and with the recent woes in the global markets this move could have major economic implications both good and bad.
With Shire and Baxalta combining forces in one of the highest grossing industries in the world, we can hope to see a slight rebound in the rest of the world’s industries over the next year.
The initial analyses of this merger look good for the economy and for both parties involved.
Aside from the business aspects of this merger, two of the world’s premier pharmaceutical manufacturers joining forces could also mean great things for the healthcare community and in turn for all of society in general.
A version of this article appeared in the Tuesday, January 26th print edition.
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