Baxalta and Shire Finally Ink a Deal
Basics of the transaction
As we saw in the first part of this series, Shire (SHPG) is buying Baxalta (BXLTR) in a cash and stock merger. The equity value is $31.6 billion. If we include cash and debt, it’s worth $35.6 billion. Shareholders will receive around 0.15 shares of Shire ADS (or around 0.45 Shire ordinary shares that trade in London) plus $18.0 in cash per each share of BXLT that they own.
The following conditions need to be satisfied for the Baxalta–Shire merger to close:
- Baxalta vote
- Shire vote
- the SEC’s (Securities and Exchange Commission) approval of the joint proxy statement
- Global Payment’s filing of a PNR (premerger notification report) to comply with the Hart-Scott-Rodino Antitrust Improvements Act
- tax opinion
- any other regulatory approvals
No-shop provision and breakup fees
BXLT has a no-shop provision with a “fiduciary out,” meaning that it can’t talk to other potential purchasers while the transaction is pending. However, the “fiduciary out” does allow BXLT to talk to a bidder who makes an unsolicited approach if the board of directors believes such talks can lead to a bona fide superior offer.
If BXLT accepts a superior bid, it will owe SHPG a termination fee of $369 million.
Other merger arbitrage resources
Other important merger spreads include the Cigna (CI) and Anthem (ANTM) deal, set to close in the second half of 2015. For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.
Investors who are interested in trading in the healthcare sector could consider the S&P SPDR Healthcare ETF (XLV).
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