The altruistic reason Baxalta’s management would not sell is that they feel the offer did not reflect fair value. If this were the case, one would expect Baxalta’s management to counter-offer. It appears the company did not counter offer in any meaningful way.
The other reason Baxalta’s management would refuse to negotiate to sell the company is they are looking to reap the rewards of running the business. If the business were acquired, Baxalta’s management could potentially be unemployed. It is therefore in management’s best interest to not sell the new company. This is a case were management appears to be acting in their own best interests rather than in the best interests of shareholders.
Baxalta’s Response
Yesterday afternoon, Baxalta’s management posted a response letter to Shire. Some of the more important quotes are below:
“During our meeting this week, the Board unanimously concluded that it is not prepared to engage with Shire in a discussion about a combination of our companies based on the value you indicated in your proposal”
“A transaction at the exchange ratio you proposed significantly understates Baxalta’s true value.”
Our board is mindful of its fiduciary obligations to Baxalta’s shareholders, and we are confident in our standalone plan and our ability to generate significant shareholder value based on that plan. Baxalta’s platform is well positioned to generate substantial value for our shareholders and proceeding with a transaction at this time presents a significant and real risk to that value creation. Our Board has evaluated your proposal in this context and concluded that it is not a basis for further discussions.”
Baxalta’s response is very clear. The company is not interested in being acquired as it feels it can generate more value for shareholders as a stand alone business.
One important note that stands out is that Baxalta’s management only metthis week to discuss the deal – even though it was offered on July 10th, 2015. This shows the company was not interested in exploring the deal from the beginning, and may have only met to discuss due to pressure from Shire.
I too believe that Baxalta Inc (NYSE:BXLT) is undervalued. The company’s management should explore selling the business for a higher value, but should not disregard Shire’s bid for the company entirely. Certainly there is some price that Baxalta’s management feels is fair value for the company.
Baxalta’s CEO
Baxalta’s CEO is Ludwig Hantson, Ph.D. His bio from the company’s executive officers page is shown below:
“Ludwig N. Hantson, Ph.D., is President and Chief Executive Officer of Baxalta Incorporated and also serves on the company’s Board of Directors. Prior to Baxalta’s separation from Baxter in July 2015, he was Corporate Vice President and President, Baxter BioScience, having served in that capacity since October 2010. Ludwig joined Baxter in May 2010 as Corporate Vice President and President, International. From 2001 to May 2010, Dr. Hantson held various positions at Novartis Pharmaceuticals Corporation, the last of which was Chief Executive Officer, Pharma North America. Prior to Novartis, Dr. Hantson spent 13 years with Johnson & Johnson in roles of increasing responsibility in marketing and clinical research and development.”
Hantson was CEO of U.S. Pharmaceuticals for Novartis from April 2008 through April 2010. Baxter International Inc (NYSE:BAX) poached him from Novartis in April of 2010 to head up the company’s international division. Hantson was quickly moved off of the international division to the BioScience division.
