Mounting dissension in the ranks over Japanese takeover of Shire
PHARMA giant Takeda has become Japan’s most shorted stock ahead of its £48bn takeover of FTSE 100 rival Shire as opposition to the deal mounts.
Hedge funds have targeted Shire’s new owner as concerns grow over the impact that it will have on Takeda’s stretched balanced sheet. The Japanese giant took on billions of debt to fund the deal.
Around a fifth of Takeda’s shares are now in the hands of short-sellers at a market value of $6.6bn (£5bn), according to S3 Partners data.
A group of investors has voiced its opposition to the swoop ahead of a shareholder vote on Oct 19.
Since Shire revealed Takeda’s interest in March, the Osaka-based company’s shares have slumped 19pc, wiping off almost £5bn from its market capitalisation. Shorts against Takeda are now over double that of Toyota, the second most shorted stock in Japan.
This week, the dissenting stakeholders, which include founding family members, sent French boss Christophe Weber an open letter urging him to reveal his plans to reduce the debt pile and to justify the 60pc premium paid for Shire. They have lambasted the deal as “the height of madness”.
Hedge funds are expected to cash in if the acquisition is pushed through after ramping up their bets against Takeda in the last month. The value of shorts against the company has surged by $2.2bn in the last month.
Takeda investors are concerned about the “top dollar” paid for the deal and the debt left from Shire’s troubled swoop for Baxalta, Andy Smith, an analyst at Edison Investment Research, explained. Shire raised $12bn of debt to fund the deal for its rival in 2016.
He said: “In Japan, Takeda’s native shareholders were looking at the two years of horror that Shire had [with Baxalta] and are thinking ‘are we going to buy what is still a building site of a company?’”
“Why bite off more than you can chew when Shire bit off more than they could?”