Takeda joins giants with deal
• Shire takeover will widen reach into world’s biggest drug market and strengthen pipeline for lucrative drugs
Takeda Pharmaceutical is joining the drug industry’s giants with Japan’s largest overseas takeover — a $62bn deal for much larger rival Shire. /
Takeda Pharmaceutical is joining the drug industry’s giants with Japan’s largest-yet overseas takeover — a $62bn deal for much larger rival Shire.
CEO Christophe Weber capped a pursuit of the UK-listed company with an acquisition he described as transformational that will give Takeda wider reach into the world’s biggest drug market and strengthen its global pipeline for lucrative drugs that treat rare diseases.
“The two combined create a rich pipeline in all stages — early and late stage, which is very important,” Weber said after the deal was announced Tuesday.
“We are in a good momentum and in a strong position,” the CEO said.
Takeda’s largest acquisition would catapult the company into the top 10 within the global pharmaceutical industry.
Weber, a Frenchman who is the first foreigner to lead the 237-year-old Japanese firm, is seeking growth in new markets amid patent expirations and drug pricing pressures at home.
After fielding multiple bids for Shire, it was the fifth proposal — a preliminary agreement the two companies reached in April — that finally stuck. The Japanese company will acquire Shire for £46bn, or £49.01 a share in cash and stock, according to a statement.
To help fund the cash portion of the deal, Takeda said it had secured a bridge loan facility of $31bn with JPMorgan Chase Bank, Sumitomo Mitsui Banking and MUFG Bank among others.
Shire’s share price rose to 5.7% in London early on Tuesday, while Takeda rose 4% in Tokyo before the deal was announced. The bridge loan will be refinanced with a combination of long-term and hybrid debt, as well as cash, Weber said. The company could also consider issuing shares, he said.
With few late-stage experimental drugs in its own pipeline, Takeda needs lucrative new therapies.
A Shire takeover brings Takeda treatments for rare diseases such as haemophilia, a field that is luring a growing number of drug makers that can charge more for unique life-saving drugs than for routine treatment.
The deal increases Takeda’s exposure to the US, the world’s biggest pharmaceutical market. Shire, based in Lexington, Massachusetts, gets more than two-thirds of its revenue from North America. Takeda generates only 30% of its sales from the region.
Takeda had raised its bids over a six-week chase and agreed on a 60% premium to Shire’s closing price on March 27, before Takeda disclosed its interest.
The agreement offers $30.33 in cash and either 0.839 new Takeda shares or 1.678 Takeda US depositary receipts.
The companies indicated in late April that they had reached a preliminary deal valued at $64bn, based on a stronger exchange rate for the pound at the time. Takeda’s financial advisers included Evercore, JPMorgan Chase & Co and Nomura Holdings, while Shire received financial advice from Citigroup, Morgan Stanley and Goldman Sachs Group.
While the deal would boost Takeda’s earnings potential, it also comes with risks. Japanese investors have worried about the hefty debt.
S&P Global Ratings placed Takeda on a watch and warned it might lower the company’s ratings by up to two notches, it said on Tuesday.
Moody’s Investors Service warned in April that Takeda could face a multiple-step credit downgrade due to a “spike in leverage”.
Takeda said the deal would save about $600m in duplicated research and development costs. It expects $1.4bn in overall savings by the third year.
“The cost synergies seem to be much bigger than expected in the next three years,” Credit Suisse analyst Fumiyoshi Sakai said. / Bloomberg