Takeda Closes in on $64 Billion Shire Deal to Join Pharma Elite

(Bloomberg) -- Takeda Pharmaceutical Co. reached a preliminary agreement to buy Shire Plc with a sweetened takeover offer of about 46 billion pounds ($64 billion), closing in on a bold transaction to gain a foothold in one of the pharma industry’s most coveted niches.

The U.K.-listed company’s board said it was willing to recommend the latest offer to shareholders on Wednesday, capping a month-long tug of war in which its Japanese suitor made five successively higher proposals, two of them in the last few days.

Chief Executive Officer Christophe Weber is steering Takeda into its largest-ever transaction to replenish the drugmaker’s pipeline of medicines with promising treatments for rare diseases such as hemophilia -- a field that’s lured many pharmaceutical companies lately because they can charge more for unique life-saving drugs than for routine treatments. But the smaller Japanese company’s thirst for the larger Shire fueled concern among investors and Takeda slumped the most in almost five years in Tokyo trading.

“Some investors hate the acquisition because of the financial risk,” said Naoki Fujiwara, chief fund manager for Shinkin Asset Management Co. “Others like it because it will strengthen Takeda’s engine of growth.”
Japanese investors expressed concern about the hefty debt and the possibility Shire shareholders would sell their new Takeda stock, even as the company reiterated its commitment to its investment-grade credit rating.

The transaction could result in a multinotch downgrade on Takeda’s A1 rating, Moody’s Investors Service wrote in a report on Wednesday.

Takeda is offering the equivalent of about 49 pounds a share, including 27.26 pounds in stock and 21.75 pounds in cash, the companies said in separate statements. That’s a 60 percent premium to Shire’s closing price on March 27, before Takeda disclosed its takeover interest.

The companies also received an extension from U.K. regulators until May 8 for Takeda to make a firm offer. Shire shares rose less than 1 percent in London trading, valuing the company at 36 billion pounds.

Weber is seeking growth outside Japan amid patent expirations and a shrinking domestic population. A completed deal would be the biggest by a Japanese company of an overseas target, and create one of the world’s largest pharmaceutical companies. With few late-stage experimental drugs in its own pipeline and a shrinking home market, Takeda needs lucrative new therapies.

Shire shareholders would own half of the enlarged company under the latest Takeda proposal.

“The deal seems to be much more of a merger,” Ronny Gal, an analyst with Sanford C. Bernstein & Co. in New York, wrote in a note to clients.

The takeover is likely to go through, according to Gal. Allergan Plc, another potential bidder, withdrew last week.

“If there is another bidder for Shire, they will reasonably emerge in the next two weeks,” Gal said. “We think such bidder is unlikely, as we expect Shire bankers to have left no stone unturned.”

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, Marthe Fourcade, Eric Pfanner

©2018 Bloomberg L.P.