Undervalued Baxalta Inc (BXLT) Shares Target of Acquisition by Shire PLC (ADR) (SHPG)

This is the first time Hantson has been the top CEO of a business. I do not known Dr. Hantson, but it appears he is not yet ready to let go of the reins in his new positions. This is understandable, given he has held the job for just over a month. Hantson (assuming it was he who Shire contacted) was contacted just 9 days after becoming the CEO to sell the business. I completely understand not wanting to sell so quickly, but a CEO’s job is to do what is in the best interest of the shareholders, not what is in his best interest.

Expect Corporate Drama Ahead

It is possible that Baxalta’s management could be attempting to significantly drive up Shire’s asking price by remaining aloof to the deal.

If this is the case, we will likely see renewed engagement between the two companies’ managements regarding an acquisitions.

A hostile takeover of Baxalta by Shire is not out of the question, either. Shire’s management did say that:

“it is our strong preference to immediately enter into a negotiated transaction to explore the full potential of the proposed combination and finalize the terms of an agreement.”

This signals the company would much rather engage in a peaceful acquisition than a hostile acquisition.

Whatever the case is, the Shire announcement bodes well for Baxalta shareholders. The announcement sheds light onto the undervalued company. If an acquisition is completed, Baxalta shareholders will see even higher gains.

If an acquisition does not occur, the company still has received a boost and will likely trend toward a price-to-earnings multiple around 20 over time, which will result in rising share prices. Baxalta’s management is also recently announced a $1 billion share repurchase plan, showing it strongly believes the company is undervalued.

Disclosure: None