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Shire says Baxalta merger on track despite US tax clampdown

After Pfizer/Allergan deal falls apart company says its combination will still go ahead

ShireShire has said it is confident its $32bn deal to buy Baxalta will go ahead as planned, despite the abandonment of Pfizer's merger with Allergan.

The marriage of Shire and Baxalta - first announced in January - is scheduled to close later this year. While Pfizer and Allergan's $160bn merger was called off this week after the US outlined new plans to prevent corporate tax inversion deals, Shire has always insisted that the deal with Baxter spin-off Baxalta does not fall into that category.

The US government announced plans on Monday for new tax inversion rules that aim to prevent US corporations sidestepping taxes by reporting revenues and profits overseas. In recent years a steady stream of pharmaceutical firms have gone down this route by acquiring companies in low tax countries and in Pfizer's case the deal would have shifted the company from the US to Ireland.

Pfizer previously said the merger would reduce its corporate tax rate from around 25% to 17%-18%, with Ireland serving as its legal domicile despite the group's corporate headquarters remaining in the US.

In a short statement, Ireland-domiciled Shire acknowledged the notice by the US Treasury but said it “anticipates the Baxalta transaction will proceed as originally announced”. The threat of a clampdown on tax inversions in the US was one factor behind the abandonment of Shire's proposed takeover by AbbVie last year.

“The combination of Shire and Baxalta is based on a strong strategic rationale to create the leading global biotechnology company focused on rare diseases,” it added. “The company currently expects to complete its proposed combination by mid-2016.”

Shire's statement prompted a spike in Baxalta's share price yesterday and calmed investors jittery about the prospects for the deal, while Shire's stock fell and recovered over the course of the day.

The company has said the post-merger firm will be able to deliver double-digit sales growth to more than $20bn by 2020, with around two-thirds of its turnover coming from the combined rare disease therapies portfolio.

Article by
Phil Taylor

7th April 2016

From: Sales

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