The worst kept secret is now official, Baxalta (BXLT) is being acquired by Shire (SHPG) in a stock and cash transaction valued (10 Jan 2016) at $45.57 per share of BXLT. I was late to the Baxter party, buying into it just prior to the Baxalta spinoff due to valuation concerns. These were confirmed shortly after spinoff with Baxter now a resident of my penalty box following the delivery of my very first (and currently only) dividend cut.
Having persevered, we are now being justly rewarded. To break out the benefits – it’s a cash and stock transaction:
- .1482 sh of SHPG and $18 for every BXLT share.
This represents a 13.8% premium over Friday’s close and a 22.5% premium over cost. Not too shabby a return for six months. Then reality sets in. The negatives are many:
- Has a formal ruling been received regarding tax consequences due to the spinoff
- Impact of Shire’s impending move from Ireland to the UK on taxes
- Shires’ dividend rate (currently ~.3%) on an interim/final schedule
Although I like the combination and the pipeline, this deal calls for a longer term view than I’m willing to provide. Therefore, I anticipate selling prior to or shortly following the merger depending on valuation (i.e., is the $18 premium effectively priced in).