Shire Plc agreed to buy Baxalta Inc. for about $32 billion to become the world’s biggest maker of so- called orphan drugs for rare diseases.

The price includes 0.1482 of Shire’s American depositary receipts and $18 in cash for each Baxalta share held, the Dublin-based drugmaker said in a statement. Baxalta had rebuffed an unsolicited $30 billion all-stock bid that valued the company at $45.23 a share in July.

Other recent deals in the middle market biopharmaceutical space include Midatech Pharma purchasing Galena Biopharma; Charles River Laboratories International Inc. (NYSE: CRL) adding Wil Research; and Carlyle Group (Nasdaq: CG) teaming up with Boune Partners to form acquisition platform Phoenix Therapeutics.

 The acquisition of the Deerfield, Illinois-based company boosts Shire’s position in the market for rare-disease treatments, which will grow by more than 60 percent over the next five years to $176 billion, according to market researcher EvaluatePharma. The combined company would generate $20 billion in sales by 2020, Shire said.

With Baxalta, Shire gains a dominant position in providing treatments for hemophilia, a bleeding disorder that affects only about 20,000 people in the U.S. Baxalta’s drug Advate, for hemophilia A, can cost $200,000 to $500,000 a year and is well reimbursed by insurers. That would add to Shire’s collection of rare-disease drugs, which includes Cinryze for an inflammatory disease. Cinryze is among Shire’s best-sellers and one of the most expensive medicines in the world, costing as much as $630,000 a year.

Baxalta will benefit from a lower tax rate by being taken over by Shire, which has a Dublin legal address despite keeping many operations elsewhere. The U.S. drugmaker had projected a tax rate of 23 percent in 2016. A combination would yield an effective tax rate of 16 percent to 17 percent, Shirehas said.

The value of the offer as of Shire’s Jan. 8 closing price represents a premium of about 38 percent to Baxalta’s share price on August 3, 2015, the day before the public announcement of Shire’s initial offer for Baxalta. Baxalta shareholders will hold about 34 percent of the enlarged company. The parties expect the transaction to close mid-2016.

Ropes & Gray is representing Shire. Kirkland & Ellis is representing Baxalta.


--With assistance from Makiko Kitamura and Mergers & Acquisitions' Demitri Diakantonis


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