Irish drugmaker Shire will pay about $32 billion in cash and stock to buy U.S.-based Baxalta and strengthen its position in rare disease treatments.
Shares of both companies rose in pre-market trading after the deal was announced, but Shire's stock later turned negative.
Treatments for rare diseases have become a hot and lucrative area of drug industry research in the past several years, with drugmakers testing hundreds in clinical trials.
The surge is being driven, in part, by tax breaks and other government financial incentives, patient advocacy groups raising money to help small companies start research on treatments for their disease, and scientific advances such as the mapping of the human genome, which brought greater understanding of the mechanisms causing gene-based diseases.
Shire's lead product is the attention deficit hyperactivity disorder drug Vyvanse. Baxalta's portfolio includes the hemophilia treatment Advate, and it also is developing treatments for sickle cell anemia , cancer and psoriasis.
Shire said Monday it will give Baxalta shareholders $18 in cash and a portion of a Shire share for each Baxalta share. That adds up to a per-share price of $45.57 per share based on Friday's closing price of Shire's U.S.-traded stock.
The boards of both companies have agreed to the deal, but shareholders still need to approve it. The companies expect the deal to close in the middle of the year.
Shire had made an initial run at Bannockburn, Illinois-based Baxalta last summer, with a $30 billion offer that its target rejected as too low. Shire said Monday that its latest offer represents a premium of nearly 38 percent to Baxalta's share price before Shire went public with its previous bid in early August.
Baxalta shareholders will wind up owning about 34 percent of the combined company under the latest proposal.
Shares of Baxalta Inc. inched higher 0.07 percent an hour after markets opened Monday, to $40.08, while U.S.-traded shares of Shire Plc were down $8.54 to $177.47.