Drugmaker Takeda agrees to buy Shire for $64 bn

Frederick Owens
April 26, 2018

Shire's board last night set the stage for a potential Takeda acquisition by saying it would recommend to shareholders approval of Takeda's approximately £46 billion ($64 billion) offer for the company-if other terms can be worked out.

This would give Shire shareholders a 50% holding in the merged company, a sticking point in negotiations as they did not want too much exposure to any issues from a mega merger that will create one of the world's largest pharma companies.

The development marks a breakthrough in the takeover talks which included five offers by Takeda since late March. Prior to Takeda's approach, Shire was already considering divestments and a split in its operations. The revised proposal comprises 0.839 new Takeda shares and US$30.33 in cash for each Shire ordinary share.

Dealmaking has surged in the drug industry this year as large players look to improve their pipelines.

Shire has, as permitted by the United Kingdom takeover code, extended the deadline for Takeda to make a formal offer from 5 p.m. GMT today to May 8, in order to allow the companies to conclude their respective due diligence processes and other formalities. Shire added the deadline may be extended further if needed.

Any deal between the two companies is still subject to the resolution of several issues, including completion of due diligence by Shire on Takeda, Shire said.

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It would significantly boost Takeda's position in gastrointestinal disorders, neuroscience, and rare diseases, including a blockbuster haemophilia franchise.

If successful, it would be the largest overseas acquisition by a Japanese company and propel Takeda, led by Frenchman Christophe Weber, into the top ranks of global drugmakers.

Weber was promoted to CEO in 2015, becoming the drugmaker's first non-Japanese boss.

"The most recent terms still have a relatively high equity component as [Shire] shareholders would receive $30.33 in cash and 0.839 new Takeda shares (via a listing in Japan and in the USA via an ADR program) for each ordinary share - or 56% equity and 44% cash (similar to Takeda's fourth offer of last Friday)", wrote Jefferies analyst David Steinberg in a note to clients on April 25.

Moody's said the deal would pile up debt and hit Takeda's credit ratings. Hence why the overall bid and cash has had to be revised higher (£21.75/share represents a 36% improvement on the Takeda's first proposal), to sweeten the deal and try to compensate for some of the share price decline.

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