Shire has sent a highly conditional, unsolicited proposal to acquire all outstanding common shares of Northern Illinois-based Baxalta in an all-stock transaction under which Baxalta shareholders would receive 0.1687 Shire ADRs for each Baxalta share.

Baxalta received this same proposal privately July 10. In accordance with its fiduciary duties, Baxalta’s board of directors, in consultation with its financial and legal advisors, carefully reviewed the proposal and unanimously determined that it was not in the best interests of Baxalta or its shareholders.

“The board today reaffirmed its conclusion that Shire’s proposal significantly undervalues Baxalta and its attractive prospects for growth and value creation, and that a merger at this time would be severely disruptive at this very early stage of Baxalta’s existence as a public company and presents a significant and real risk to value creation for our shareholders,” said Wayne T. Hockmeyer, Ph.D., chairman of the board of Baxalta.

The following is the text of the letter sent July 31 by Baxalta Chief Executive Officer and President Ludwig N. Hantson, Ph.D., to Shire’s Chief Executive Officer Flemming Ornskov, with respect to Shire’s proposal:

“As I previously indicated I would do, I have thoroughly reviewed your July 10 proposal with the Baxalta board of directors with the assistance of our legal and financial advisors. 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 and other important factors as noted below.

“Our board strongly believes that Baxalta’s independent global infrastructure and world-class manufacturing operations will provide an excellent platform to grow value for our shareholders. As a new, publicly traded entity only since July 1, we are just in the initial stages of implementing our growth strategy as a stand-alone company and our stock has not yet achieved a price level that appropriately reflects the company’s value and prospects. A transaction at the exchange ratio you proposed significantly understates Baxalta’s true value.

“Moreover, we do not believe that a combination of our two companies would be strategically complementary, or that our respective product portfolios would benefit from such a combination. And we do not think the combination would generate substantial operational or revenue synergies, which would be critical to any potential value creation for our shareholders. Perhaps even more importantly, a transaction at this time would be severely disruptive to our young organization and the implementation of a wide variety of critical commercial, R&D and operational initiatives and thus carries with it significant risks for our shareholders.

“Our board is mindful of its fiduciary obligations to Baxalta’s shareholders, and we are confident in our stand-alone 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.”