Shire Rebuff May Not Dim Takeda's Appetite for a Takeover

(Bloomberg) -- Three years ago, Christophe Weber made waves in Japan when 237-year-old Japanese drugmaker Takeda Pharmaceutical Co. named him its first foreign chief. These days, he’s in the hot seat for his controversial pursuit of much larger American rival Shire Plc.

Takeda on Thursday said it had made a $60 billion bid for Shire that was rejected, but the two companies continue to have discussions. Weber’s pursuit of the mammoth acquisition reveals the challenge he faces in ensuring the future of Japan’s biggest drugmaker. With few late-stage experimental drugs in its own pipeline and a shrinking home market, Takeda needs lucrative new therapies like Shire’s medicines for rare diseases.

That could drive Weber to keep pushing for a deal even as questions swirl about his ability to pull off such a big purchase. A group of Japanese lenders, including Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., have agreed to arrange 1 trillion yen ($9.3 billion) in financing for the deal, according to a person familiar with the matter.

The financing total may still change as Takeda’s discussions with Shire progress, according to the person, who asked not to be identified as the information is not public. Sumitomo Mitsui did not immediately respond to a request for comment on the financing arrangement. An MUFG spokesman declined to comment.

There’s a good chance Takeda could come back with another offer, and in order to make it more appealing to Shire shareholders it may have to boost the cash portion of its bid, said Credit Suisse Group analyst Fumiyoshi Sakai. Still, Sakai said the financing appeared to be up in the air and Weber’s credibility with investors is on the line.

“If he makes the decision to go for it, he’s going to have to see it through,” Sakai said.

A Takeda spokeswoman declined to comment.

Pressure on Weber is mounting. Taken aback by Takeda’s chase of a target so much larger than itself, investors have already driven the stock down 14 percent since the first announcement, putting the Japanese company’s market value at $36 billion. Its bonds also tumbled on Friday on concerns it could be stuck paying a steep price tag.

Shire shares fell as much as 4.4 percent on Friday in early London trading, as investors reacted to the reduced likelihood of a bidding war following Allergan Plc’s decision not to make a rival offer for the company.

Shire rejected Takeda’s proposed terms of 46.50 pounds ($65.50) a share -- 62 percent of it in stock -- but said it’s willing to negotiate.

Adding to Weber’s problems, another potential bidder briefly emerged in the form of Allergan Plc. The company said Thursday morning that it was considering an offer for Shire, but announced the same afternoon that it didn’t plan on making one. In Japan, meanwhile, Weber is facing an increasing number of questions about this plans.

“Since Shire declined the offer, there’s a possibility the company could get more expensive,” said Naoki Fujiwara, chief fund manager for Shinkin Asset Management Co., which holds a position in Takeda according to data compiled by Bloomberg. “We need to be aware of the financial risks. Things are unclear and I’m worried about it.”

A French national, Weber grew up in the Alps near Geneva and mountain climbing was his favorite pastime. Both of his parents were doctors, becoming the inspirations behind his decision to join the pharmaceutical industry.

Weber, 51, has shown a willingness to work through criticism and tough situations. In columns written last year for Japan’s Asahi newspaper, he said he almost never loses his composure.

He also wrote about his father, who died in a mountain accident in an avalanche. Weber, who was 15, was with him at the time. His younger brother later died at the age of 24. Those events shaped his character, he said. After his father’s death, he did less mountain climbing and pursued more education, getting a PhD.

“Growing up in the mountains was a good education for life in terms of understanding your limits and risk management,” he wrote.

When his appointment to the top role at Takeda was first announced, investors and former employees wrote in to protest the naming of a foreign chief executive officer. A veteran of GlaxoSmithKline Plc, who had been the president of its vaccine division, Weber appeared unfazed.

In the articles, Weber said many people had told him not to take the Takeda job, but he felt excited by the challenge. “Of course it was risky, but losing the opportunity could cost you more,” he wrote.

Restructuring

In Japan, pushback against Weber’s appointment eased as new medicines and extensive restructuring helped drive profits on his watch. He sold non-core businesses. He also forged deals and partnerships for early-stage drugs. Last year, he paid about $4.7 billion for U.S. cancer drugmaker Ariad Pharmaceuticals Inc. Medicines like the gastrointestinal drug Entyvio -- acquired through Takeda’s 2008 purchase of Millennium Pharmaceuticals Co. -- helped drive a jump in profits.

But Takeda still needs a substantive future pipeline of experimental medicines -- the lifeblood by which drugmakers live and die. Shire would bring new assets in gastrointestinal diseases and nervous-system ailments, as well as key treatments in the late-stages of testing. A deal would help Weber replenish the company’s pipeline, although with a hefty price tag.

“I think Shire is a good company, but the financial risk is bigger,” said Fujiwara, the fund manager.

--With assistance from Yuki Hagiwara and John Lauerman

To contact the reporters on this story: Lisa Du in Tokyo at ldu31@bloomberg.net, Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Anjali Cordeiro, Jeff Sutherland

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