Takeda will buy Shire for $62 billion
Takeda Pharmaceutical Co. of Japan is joining the drug industry’s giants with the $62 billion takeover of much larger rival Shire.
Takeda CEO Christophe Weber capped a drawn-out pursuit of the Irish 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 on a call after the deal was announced Tuesday. “We are in a good momentum and in a strong position.”
Takeda’s largest acquisition will catapult the company into the top 10 in the global pharmaceutical industry. Weber, a Frenchman who is the first foreigner to lead the 237-year-old firm, is seeking growth in new markets amid patent expirations and drug pricing pressures at home.
After making multiple bids for Shire, it was the fifth proposal — a preliminary agreement the two companies reached last month — that finally stuck. The Japanese company will acquire Shire for cash and stock.
To help fund the cash portion of the deal, Takeda said it has secured a bridge loan of $31 billion.
The bridge loan will be refinanced with a combination of longterm and hybrid debt, as well as cash, Weber said.
Shares of Takeda rose in Tokyo by 4 percent. Shire shares on Nasdaq closed up more than 1 percent.
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 hemophilia — a field that’s luring a growing number of drugmakers that can charge more for unique life-saving drugs than for routine treatment.
The deal increases Takeda’s exposure to the U.S., the world’s biggest pharmaceutical market. Shire, with U.S. headquarters in Massachusetts, gets more than two-thirds of its revenue from North America. Takeda generates only 30 percent of its sales from the region.
Takeda had raised its bids over a six-week pursuit of Shire, and agreed on a 60 percent 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 American depositary receipts.
Takeda’s financial advisers included Evercore Inc., JPMorgan Chase & Co. and Nomura Holdings Inc., while Shire received financial advice from Citigroup Inc., Morgan Stanley and Goldman Sachs Group Inc.
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 may lower the company’s ratings by up to two notches, it said Tuesday.
Moody’s Investors Service warned last month that Takeda could face a multiplestep credit downgrade.
Takeda said the deal will save about $600 million in duplicated research and development costs. The company expects $1.4 billion 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.
Takeda, which has seen its market value slide to $34 billion since announcing its interest, is taking over a much bigger rival. Shire’s shares have soared 31 percent, giving the company a market capitalization of about $50 billion.
A completed deal would dwarf SoftBank Group’s $40 billion purchase of Sprint in 2013, which ranked as the biggest takeover by a Japanese company. Takeda’s largest previous purchase was a $13.7 billion takeover of Nycomed in 2011. Last year, the company expanded its footprint in the U.S. oncology market with the $4.7 billion purchase of Ariad Pharmaceuticals Inc.
Takeda said it will maintain its headquarters in Japan and will evaluate consolidating Shire’s operations into Takeda’s in the Boston area, Switzerland and Singapore.
The company expects it may reduce the combined workforce by 6 to 7 percent in the three years after the takeover, it said.