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LONDON—Shire PLC is weighing options for sweetening its multibillion-dollar, all-stock offer for U.S. biotechnology firm Baxalta Inc. by putting cash into shareholders' hands sooner, said people familiar with the matter.

The Dublin-based drug maker's unsolicited proposal—disclosed last month and valued at $30.6 billion based on Shire's stock price at the time—excluded any cash. Shire said that was to maintain the tax-free status of Baxalta's recent spinoff from Baxter International Inc., both based in Deerfield, Ill.

Shire said instead it would return cash to Baxalta investors by launching a share buyback program "promptly after" the close of the deal. Baxalta, which was spun off from Baxter in July, rejected the offer as too low.

Now, Shire has communicated to some Baxalta shareholders that it is considering how it might fashion a revised deal that would hand cash to shareholders sooner than the buyback plan allows, without jeopardizing the tax-free status of the spinoff, according to the people familiar with the matter.

It isn't clear what specific avenues Shire and its advisers are pursuing—or whether Shire is now considering boosting the overall value of its offer. One complication for Shire is that the value of its stock has fallen some 17% since it made its approach to Baxalta public in early August. That decline could require it to sweeten its bid beyond simply speeding up the payment of cash to investors.

The issue is far from clear-cut, say tax lawyers, because there are few well-known examples of a company being purchased so soon after a spinoff.

Tax experts say one option could involve Baxalta agreeing to take out a loan to pay a special dividend to its shareholders before an all-share acquisition by Shire.

U.S. law provides for tax-free spinoffs in most cases. But there are restrictions, including a provision that such spinoffs not be used as a "device" to funnel cash to shareholders. Tax experts say a quick sale that involves cash being paid to Baxalta shareholders could run afoul of this stipulation.

Anything that disqualifies the tax-free treatment of the spinoff would put Baxter in line to pay a 35% corporation tax on its gains from the spinoff.

A dividend payment might not raise the same issue. The device test "doesn't preclude people from paying dividends," said Robert Willens, an independent tax expert.

Bill Dantzler, a New York-based partner at the law firm White & Case LLP, which isn't involved in the deal, said the law has gray areas. "There aren't clear bright lines as to what is a device and what is not," he said.

Shire Chief Executive Flemming Ornskov has spent the weeks since going public with his proposal trying to convince shareholders that a combination of the companies would create a global rare-disease powerhouse. Both companies made around $6 billion in revenue in 2014.

Shire is best known for its hyperactivity drugs, but its focus has shifted toward rare diseases in recent years. Baxalta specializes in treatments for the bleeding disease hemophilia and immune deficiencies.

While Shire's attempt to acquire Baxalta so soon after its spinoff is unusual, there have been a handful of cases in which companies have successfully acquired recent spinoffs for cash after a bit more time. In 2011, Google Inc. acquired cellphone maker Motorola Mobility Holdings Inc. in an all-cash deal seven months after Motorola Mobility had been spun off by parent company Motorola Inc. Google later sold the unit to Lenovo Group Ltd.

In 2006, Apollo Global Management LLC paid cash to acquire real-estate broker group Realogy, which had been spun out of the now defunct Cendant Corp. 4½ months earlier. Apollo has since exited that investment.

Amid those high-profile examples, the passage of time can work in Shire's favor. "Every day that passes, probably helps the tax analysis," Mr. Dantzler said.

Write to Shayndi Raice at shayndi.raice@wsj.com and Denise Roland at Denise.Roland@wsj.com

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(END) Dow Jones Newswires

September 13, 2015 20:35 ET (00:35 GMT)

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