Baxalta (BXLT) Acquisition Of Ariad (ARIA): The Deal Needs To Be Sweeter!

Baxalta Inc (NYSE: BXLT) | Ariad Pharmaceuticals, Inc. (NASDAQ: ARIA)

One of the biggest pieces of news in biotech at the moment is Baxalta’s desire to acquire Ariad Pharmaceuticals. However a wrench may have been thrown into the idea. Yesterday, I reported that while we knew the acquisition talks were under way, we didn’t know much about the deal. However, today, we know quite a bit more. Currently, we know how much money BXLT offered ARIA and we know ARIA’s response. Today, we’ll talk about the deal on the table, what will need to change about it, and what we can expect to see moving forward.

Details Of The Deal & Ariad Pharmaceuticals’ Response

Early this morning, I found this post on Bidness ETC. In the post, it was reported that Baxalta offered Ariad Pharmaceuticals $2 billion for the acquisition. However, the report informed readers that Ariad Pharmaceuticals has declined the offer and it’s easy to see why. In today’s biotech market, the average premium on acquisitions has been about 50%. However, with a current market cap of $1.78 billion, ARIA only realizes a premium of just over 12%, not nearly the average and in my opinion, not even close to acceptable. As a matter of fact, ARIA should be receiving an offer of around $2.67 billion from any company, including Baxalta, that wants an acquisition.

Why Baxalta Wants To Acquire Ariad Pharmaceuticals

There have been several companies in the biotechnology space that have been focused heavily on improving their oncology departments and Baxalta is one of them. Ariad Pharmaceuticals is a company that’s known for it’s work in the cancer treatment space. Therefore, if BXLT was to purchase ARIA, they would inherit all of the research and proprietary technology that ARIA has come up with which could be enough to bring BXLT to the next level in their oncology research.

Will The Acquisition Actually Happen

In my opinion, things are up in the air at the moment, but it doesn’t look good for the acquisition. By Baxalta’s initial offer of $2 billion, it’s easy to see that the company is looking for a discount from the average. However, Ariad Pharmaceuticals knows that their company is worth far more – about $670,000,000 more! So, talks will continue, however, I don’t see either company buckling. Nonetheless, no one can tell the future and I’m not one that claims to have that ability. So, only time will tell.

What Do You Think?

Do you think BXLT will acquire ARIA? Let us know your opinion in the comments below!

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