Takeda Could Face Multiple Downgrade on Shire Deal: Moody's

(Bloomberg) -- Takeda Pharmaceutical Co. could face a multiple-step credit downgrade due to a “spike in leverage” if its proposed acquisition of Shire Plc goes ahead, Moody’s Investors Service said Wednesday.

If the purchase proceeds as proposed, Takeda’s reported debt will increase to around 6 trillion yen ($55 billion) from about 1 trillion yen, Moody’s said in a statement. That’s counting potential acquisition debt of about 3 trillion yen for the cash portion of the consideration plus the consolidation of Shire’s debt of approximately 2 trillion yen, it said.

That would increase Takeda’s debt to earnings before interest, taxes, depreciation and amortization to about six times from a low- to mid-three times that Moody’s forecasts for the fiscal year ended March 2018, the rating firm said.

Moody’s said it will take rating action should Takeda make a firm offer for Shire. It now has an A1 grade on the Japanese drug company, the fifth-highest level.

The rating firm said the proposed deal faces hurdles, as seen by Takeda’s amending its offer multiple times already, and extending a deadline required under U.K. takeover rules to May 8.

It’s possible that Takeda will revise its offer again to counter any Shire objections or other suitors that may appear, Moody’s said.

The deal also requires approvals from anti-competition authorities and shareholders from both companies, and that could delay or challenge the transaction, the rating company said.

©2018 Bloomberg L.P.