Takeda's Long Battle for $62 Billion Shire Deal Gets Victory
The Takeda Pharmaceutical Co. logo is displayed at the company’s global headquarters in Tokyo, Japan. (Photographer: Kentaro Takahashi/Bloomberg)

Takeda's Long Battle for $62 Billion Shire Deal Gets Victory


(Bloomberg) -- Christophe Weber, the chief executive officer of Takeda Pharmaceutical Co., has faced a string of challenges in his $62 billion pursuit of U.K.-listed drugmaker Shire Plc. The Japanese company’s shares tumbled, dissident shareholders tried to derail the deal and Shire repeatedly rebuffed his initial bids.

Takeda's Long Battle for $62 Billion Shire Deal Gets Victory

Now the Frenchman has emerged victorious as 88 percent of Takeda shareholders voted in support of the acquisition, virtually ending Weber’s nine-month campaign to secure Shire, whose investors overwhelmingly backed the deal.

The Takeda vote represents a clear endorsement of Weber’s vision to transform the 237-year-old company into a top 10 drugmaker with lucrative therapies for rare diseases and a sizable footprint in the U.S. The scope of the combination underscores Weber’s ambitions: it’s the biggest acquisition announced globally this year and the largest overseas takeover ever by a Japanese company.

Takeda shares rose 1.1 percent in trading Wednesday in Tokyo. The stock is still down 23 percent since the Japanese company announced its interest in March. Shire rose 3.6 percent in early London trading, lifting it near the offer price. The shares have jumped 53 percent since March 27.

The deal came with a price -- Takeda has to shoulder more than $30 billion in additional debt. Weber also faces pressure to ensure the company that began in the 18th century by selling herbal therapies retains its Japanese heritage. Yet the Shire takeover is a key part of his strategy for survival -- a way for Takeda to deal with a drying pipeline of late-stage drugs.

‘Buying Time’

The cash flow from the transaction gives Takeda three to five years of added time to build up its own pipeline of experimental drugs, most of which are still in the early stages of development, Fumiyoshi Sakai, an analyst at Credit Suisse Group AG, said in a Nov. 19 interview.

“Takeda is buying time,” Sakai said. “In that sense, Shire is the perfect match to fill in the gap. Now, is 7 trillion yen worth five years? That’s yet to be seen.”

Shareholder approval also bolsters Weber’s own position. He is Takeda’s first foreign CEO and one of the few senior international leaders left in Japan, a country already grappling with the recent ouster of Nissan Motor Co. Chairman Carlos Ghosn.

Takeda's Long Battle for $62 Billion Shire Deal Gets Victory

The investor vote is also a rejection of the views of a small group of Takeda shareholders in Japan who publicly campaigned against the Shire deal, arguing that the company would no longer be a Japanese business. The group’s members are primarily concerned with the financial risk of the added debt, as well as the impact on earnings and the company’s dividend.

At least one member of the dissident group seems to have moved beyond his opposition and is now looking to Takeda’s future.

“It would be great if things could go as well as Weber said it will in the long-term and the stock returns to its original level or even higher,” Katsuhiko Ogino, 82, a former Takeda employee, said in Osaka. “I do think fundamentally the company needs to internationalize."

U.S. Presence

While Weber has pledged to keep Takeda’s Japanese roots, the globalization push will give it a greater presence in the U.S., the world’s largest pharmaceutical market. Its portion of sales from the region will grow to 48 percent of revenue from 34 percent after it completes the purchase.

"The expansion of Takeda’s U.S. footprint is a big part of the rationale for this deal," said Morningstar analyst Karen Andersen. Many of Shire’s products, particularly plasma and rare disease therapies, are sold to hospitals, which could give Takeda more leverage with negotiations for some of its own products, Andersen said in an email.

The benefits of U.S. exposure greatly outweigh any uncertainties tied to pricing pressure in the country, added UBS Group AG analyst Atsushi Seki.

“In the U.S., innovation will still be rewarded even though price increases are probably difficult in this era,” he said. “After this deal, Takeda’s U.S. exposure will be nearly half of revenues -- I think that’s the beauty of this deal."

When Takeda and Shire arrived at an agreement in May, the $62 billion cash and stock deal was the largest announced globally this year, data compiled by Bloomberg show. The value has since declined with the slumping stock price.

The acquisition is part of an unprecedented foreign acquisition wave this year. Japanese companies have stepped up their deal hunt in a search for growth at the same time China’s most prolific dealmakers have been hobbled by regulatory probes and new outbound investment rules.

Japanese purchases overseas have more than doubled this year to $173 billion, while deals from China have fallen nearly 25 percent to $114 billion, data compiled by Bloomberg show.

The Road to a Deal
March 28Takeda confirms it’s considering approach to Shire
May 8Company reaches agreement to buy Shire for $62 billion
July 10U.S. Federal Trade Commission clears Shire deal
Sept 14Shire deal gets regulatory approval from China
Oct 18Japan regulators give approval for Shire deal
Nov 20Deal gets EC nod, while Glass Lewis and ISS recommend deal
Dec 5Takeda shareholders vote to approve deal
Jan 8Deal is expected to close

The combined company is expected to benefit from $1.4 billion in annual cost savings by the third year after the deal closes.

Takeda’s leverage will be about five times its earnings after taking on the $30 billion of debt to buy Shire, as well as Shire’s $13.7 billion of net debt. The company has said that one way to quickly reduce debt would be to sell as much as $10 billion of assets. Medicines like Shire’s eye drug and Takeda’s over-the-counter drug business in Europe are being considered as potential disposals.

With the deal sealed, Shire -- with headquarters in Ireland and an operational hub in the U.S. --will be Weber’s new task. Takeda will have to successfully fold in a new business with a wide geographic reach and varied therapeutic areas to match its own style.

"I think Takeda and Shire have very different cultures," said UBS’s Seki. "So talent retention and the cultural merger between Takeda and Shire will be very important."

©2018 Bloomberg L.P.

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