Takeda Hires Banks for Euro Bonds to Finance Shire Takeover

(Bloomberg) -- Takeda Pharmaceutical Co. Ltd has picked banks to arrange a euro bond offering to finance its $62 billion acquisition of larger rival Shire Plc.

The Japanese drug maker will begin meeting European investors on Nov. 12 for a deal comprised of two-year, four-year, eight-year and 12-year notes, according to a person familiar with the matter, who asked not to be identified because the information is private. JPMorgan Chase & Co., SMBC Nikko Securities Inc., Morgan Stanley, Barclays Plc, BNP Paribas SA and HSBC Holdings Plc are arranging the deal. Earlier, Takeda said it was planning a euro bond sale.

The securities may help refinance about $31 billion in short-term bank loans raised to fund the acquisition of its U.K.-listed rival. Analysts at SMBC Nikko Securities earlier this year forecast Takeda would refinance the biggest part of its bridge loans with dollar bonds, with the remainder in other currencies including yen-denominated securities.

The additional debt raised to fund the Shire deal has put Takeda’s ratings under pressure, with the company’s A2 rating from Moody’s Investors Service cut last month and on review for downgrade, and Japan’s Rating & Investment Information Inc. putting the company on rating monitor with a view to a downgrade.

Investors’ hunger for yield in the yen bond market mean appetite for such securities would unlikely to be harmed by a downgrade of its credit rating, Katsuyuki Tokushima, chief investment analyst at NLI Research, said last month. Moody’s has said that a plan to divest up to $10 billion of non-core business is positive for Takeda’s credit and supports its expectation Takeda’s ratings will ultimately be in the “mid to high Baa range.”

Takeda $31 Billion Refinancing to Cheer Yield-Hungry Bond Buyers

Under the terms of the acquisition, Takeda’s reported debt will increase to around 6 trillion yen ($53 billion) from about 1 trillion yen, Moody’s has said. That’s counting potential acquisition debt of about 3 trillion yen for the cash portion of the deal and would almost double Takeda’s debt to earnings before interest, taxes, depreciation and amortization to about six times.

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