Shire's $2.4 Billion Cancer-Unit Sale Sweetens Takeda Appeal

(Bloomberg) -- Shire Plc agreed to sell its cancer unit to France’s Servier SAS for $2.4 billion, tightening the U.S.-based drugmaker’s focus on rare diseases and potentially making it more attractive to Takeda Pharmaceutical Co. as it considers a bid.

The Shire unit sells treatments for leukemia and pancreatic cancer, the Lexington, Massachusetts-based company said in a statement Monday. The drugmaker said its board will consider using proceeds for a stock buyback after Takeda decides whether to go through with its contemplated offer.

A deal for Shire could be valued at as much as $50 billion, which would make it one of the biggest takeovers by a Japanese firm of an overseas company and far exceed Takeda’s own market value of about $37 billion. Cancer isn’t one of Shire’s major units, with $262 million in 2017 sales, or about 1.8 percent of the company’s total.

The sale could make a Shire deal slightly more affordable for Takeda, which spent $4.7 billion to acquire cancer drug maker Ariad Pharmaceuticals last year. Shire’s decision to buy back shares may also indicate a positive view of the bid, since increasing shareholder returns would make it easier to get approval for a deal, Kazuyoshi Saito, a senior analyst for Iwai Cosmo Securities Co.

“I have an impression that Takeda and Shire are heading in the same direction,” Saito said in a telephone interview.

Demand for rare-disease treatments and the companies that make them is heating up. The class offers life-saving products that often have few competitors, allowing manufacturers to command high prices. Recent deals include Novartis AG’s agreement to acquire AveXis Inc. for $8.7 billion, while Sanofi spent more than $16 billion this year to expand in rare blood disorders.

“While the oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire’s longer-term strategy,” Chief Executive Officer Flemming Ornskov said in the statement. “We will continue to evaluate our portfolio for opportunities to unlock further value and sharpen our focus on rare disease leadership with selective disposals of non-strategic assets.”

Takeda CEO Christophe Weber is ramping up the company’s overseas takeover ambitions, as patent expirations and a shrinking domestic population limit opportunities at home. The Japanese drugmaker announced in March that it was considering a bid for Shire and has until April 25 to make a formal offer or walk away under U.K. takeover rules. Takeda declined to comment further on Monday.

Takeda has approached lenders including Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. to ask them about financing the proposed acquisition, Bloomberg reported earlier this month, citing people with knowledge of the situation.

Shire gained as much as 3.5 percent to 3,732 pence in early trading in London. The shares have gained about 18 percent since Takeda announced its interest.

Closely held Servier will pay cash in the deal, according to the statement. Shire’s board began considering a sale of the oncology business in December. The process identified multiple potential strategic buyers across the U.S., Europe and Japan, Shire said.

--With assistance from Jeff Sutherland

To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net, Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, John Lauerman, Eric Pfanner

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