DUBLIN – Having absorbed the lessons from Abbvie Inc.'s failed $55 billion takeover bid last year, Shire plc unveiled an unsolicited $33.9 billion all-stock offer for newly spun out Baxalta Inc.

The bid of 0.1687 Shire American depository shares per Baxalta share values Deerfield, Ill.-based Baxalta at $45.23 per share, which represents a premium of 36 percent over its closing share price on Monday, immediately before the offer was disclosed. The proposed deal preserves the tax-free status of Baxalta's spinout from Deerfield-based Baxter International on July 1. Dublin-based Shire is committed to sweetening it further with a share buyback over two years, valued at more than $10 billion.

A combination of the two companies would create a global leader in the rare diseases space, Shire CEO Flemming Ornskov told investors on a hastily arranged conference call, with projected product sales of $20 billion by 2020. That's double its existing target. About two-thirds of the total would come from rare disease products. The estimate assumes annual growth in excess of 10 percent over the next five years. Pro forma revenues for the two companies this year will add up to about $12 billion.

Baxalta does not share that vision, however, at least not on the present terms. Its management summarily dismissed Shire's approach, which it made on July 10. Shire has since decided to go public with its offer.

"Given the significant potential to generate value for both companies, we've decided the most correct course of action would be to approach Baxalta shareholders directly," Ornskov said. "Baxalta shareholders deserve the right to consider this value-creating opportunity."

Some Baxalta shareholders didn't take long to consider it – and were quite happy to walk off with a handsome profit now, rather than wait for the unspecified operating, revenue and tax synergies that Shire claimed would flow from the transaction. Shares in Baxalta (NASDAQ:BXLT) surged by almost 30 percent to $43 when trading began, but fell back to under $38 in less than an hour, suggesting that Shire will have to up its offer significantly if it is going to get the deal done.

The stock closed Tuesday at $37.30, up $4.15, or 12.5 percent.

"The deal combo remains highly uncertain and we'd caution investors that the deal carries a low odds of success," Jason Gerberry, analyst at Leerink, wrote in a research note.

Baxalta's management has, so far, refused to engage with Shire's, and hostile bids have a poor record of success. The current process could prove – or disprove – that rule. "Of note, Shire indicated that they are intently focused on this transaction and are willing to go hostile," Jefferies analyst David Steinberg noted.

The main driver for the deal, from a Shire perspective, is Baxalta's long-established hemophilia franchise. Shire has been tracking it for quite some time, Ornskov said. "It's a dynamic market, but also a very stable market," he said. Although Baxalta is facing competition from new entrants with long-acting products, such as Biogen Inc., and, in the long term, from companies with disruptive technologies such as antibody-based therapies and gene therapy, the market is characterized by high levels of customer loyalty, Ornskov said.

Shire is also attracted to Baxalta's immunology franchise, which is based around its family of immunoglobulin products, and its emerging oncology business, which includes the Oncaspar (pegaspargase) product portfolio, recently acquired from Rome-based Sigma-Tau Finanziaria SpA.

"There's a compelling strategic fit between the two companies," Ornskov said.

Shire is focused on four key areas: rare diseases, ophthalmology, neuroscience and gastrointestinal and internal medicine. The company remains strongly dependent on Vyvanse (lisdexamfetamine dimesylate), its amphetamine analogue for attention deficit hyperactivity disorder. During the first half of the year, it delivered $842 million in sales – almost 30 percent of its total product sales of $2.9 billion.

The deal would also boost Shire's global footprint. It has a commercial presence in about 60 countries, whereas Baxalta's commercial organization spans 100 countries. The deal would enable Ireland-domiciled Shire to further cut its tax rate, from a previously guided 17 percent to 19 percent range to a range of 16 percent to 17 percent.

"We would get to that level by 2017," Shire's chief financial officer, Jeffrey Poulton, said. Asked if there was any risk attached to that forecast – Abbvie's bid was finally undone by uncertainties over tax inversion – Poulton replied: "In the world of tax, nothing is certain, but we're very confident about the guidance. Otherwise we wouldn't have put it out."

Another strong driver for Shire is the enhanced value of its paper. Even after its shares (NASDAQ:SHPG) dipped Tuesday 5.4 percent to $253.60 on the news, the stock is still above the $245 mark it traded at immediately before North Chicago-based Abbvie's deal started to unravel last October. (See BioWorld Today, Oct. 17, 2014.)