Baxalta Reportedly Finally Negotiating With Shire On Sale

Who says persistence doesn’t pay off? Months after having a buyout offer rejected and weeks after reports of its continued interest in a deal, Shire (SHPG) has reportedly gotten recent Baxter International (BAX) spinoff Baxalta (BXLT) to sit down at the table for a little M&A pow-wow. Apparently the two are making progress on a deal which would include a higher price and some cash component – a key, but also tricky feature for the recent spinoff. The price tag will surely have to grow from its initial offer which was quickly rejected, especially as Baxalta has been on a roll of late, securing a number of FDA approvals in different areas. One advantage for Shire is that it’s corporate tax rate, courtesy of its Ireland HQ, is lower than Baxalta’s.

Bidnessetc’s Hannah Ishmael suggests that other companies might be interested in Baxalta once it is in play and makes a case for Biogen (BIIB) to jump into the process. Basically, the idea is that Baxalta would beef up its hematology portfolio (where it is weak) and add some future options for growth in the rare disease market:

The promising pipeline could help Biogen expand into rare diseases treatments and beef up its portfolio for hematology drugs. Currently, the company only possesses two hematology drugs.

I’m not sure how much of a fit Baxalta really is for Biogen, but even if it doesn’t really match, execs can often convince themselves of pretty much anything when M&A is being discussed. One issue for Biogen though is that as a Cambridge, MA based company, it doesn’t have the advantage of a more favorable tax regime to help bolster (or at least justify) a big offer.

Any play for Baxalta would certainly require a strong price and a stomach for a bidding war with Shire, which has effectively staked out its territory and established a floor.

Disclosure: Author holds no position in any stock mentioned.