Shire share price rallies as pharmco agrees £46bn deal with Takeda

Ann Santiago
May 9, 2018

Up to three Shire directors will join Takeda's board. Its agreed $62 billion takeover of much larger Shire Plc would push combined revenue above $31 billion as the Japanese firm seeks growth in new markets amid patent expirations and drug pricing pressures at home.

The acquisition would "strengthen Takeda's core therapeutic areas, bringing together complementary positions in gastroenterology and neuroscience, and provide leading positions in rare diseases and plasma-derived therapies", it added.

Under the offer, shareholders would receive the equivalent value of £49.01 per Shire share and also be entitled to receive any dividends announced, declared or paid by Shire in the ordinary course prior to completion of the deal without any consequential reduction in the consideration.

It seems Takeda has finally managed to win Shire over, as the UK-based pharmaceuticals giant today unanimously recommended that its shareholders approve Takeda's offer.

Takeda said it represents a premium of around 64% compared with the price of its shares in late March, when rumours of Takeda's interest began to swirl.

The CEO of Takeda, Christophe Weber cites that jointly with the Shire, a stronger Takeda will emerge. Even though Shire's headquarters are in Dublin, it earns more than two thirds of its revenue in the USA on drugs like Adderall, which is used for ADHD.

While the deal would boost Takeda's earnings potential, it also comes with risks.

Moody's Investors Service warning last month that Takeda could face a multiple-step credit downgrade due to a "spike in leverage". Takeda also announced that the deal will cut R&D costs by about $600 million, with overall savings of $1.4 billion by the third year. The company was saddled with debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal, while generic drug makers have stepped up competition. Its net profit is about three times more than Takeda's.

Takeda is the largest pharmaceutical in Japan. However, this bid for Ireland-based Shire is significantly larger than its previous acquisitions and if finalised would become the largest takeover by a Japanese company. Last year, the company expanded its footprint in the U.S. oncology market with the $4.7bn purchase of Ariad Pharmaceuticals. In addition, Takeda is considering consolidating Shire's operations into its own in Boston, Switzerland and Singapore.

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