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Shareholders Balk at $32B Baxalta Merger

(CN) - Shareholders filed a court challenge over the $32 billion acquisition of Baxalta by Shire PLC, a merger which will create a global leader in rare-disease treatment.

Martin Bertisch filed a class action against Baxalta, its board of directors, and Shire in Delaware Chancery Court on Thursday.

Last week, Ireland-based drug maker Shire said it will buy Illinois-based Baxalta for $47.50 a share in cash and stock, a total valuation of $32 billion.

The deal offers Baxalta shareholders a 37.5 percent premium on the company's August 2015 share price, the date of Shire's initial and rejected all-cash offer. The accepted offer will give Baxalta shareholders a 34 percent stake in the combined company.

The combination will create a pharmaceutical giant in the market for treatment of rare diseases, a market that is expected to account for 65 percent of drug revenues by 2020.

According to the New York Times, "Part of Shire's ability to pay such a premium for Baxalta is tax savings."

The combined company, headquartered in Ireland, will be subject to a tax rate of 16 to 17 percent, compared to Baxalta's current rate of 23 to 24 percent - which will save it $500 million annually.

However, plaintiff shareholders are unhappy with Shire's offer and question why Baxalta's board accepted the merger when just five months ago they rejected a lower offer because "a merger at this time would be severely disruptive at this very early stage of Baxalta's existence as a public company."

Baxalta only became an independent company in July 2015, when it was spun off from Baxalta International.

Plaintiffs say Baxalta's intrinsic value is higher than $32 billion, especially given the additional costs Shire expects the company will be able to save on taxes and synergies.

Tax considerations also drove the proposed $54 billion sale of Shire to AbbVie last year, but the deal was dropped when the Treasury Department adopted new rules against corporate inversions - the term for when an American company acquires a foreign company and reincorporates abroad to lower its tax bill.

The class seeks an injunction against the proposed merger and damages for breach of fiduciary duty.

It is represented by Seth Rigrodsky with Rigrodsky & Long in Wilmington, Delaware.

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