Takeda clinches $62 billion deal to buy drugmaker Shire

Bloomberg

Takeda Pharmaceutical Co. reached an agreement to buy larger rival Shire Plc for about 46 billion pounds ($62 billion) in a deal that transforms it into a top drugmaker in the lucrative business of rare diseases and boosts its heft in the US.
The Japanese company capped a drawn-out pursuit by agreeing to pay Shire 49.01 pounds a share in cash and stock, based on Takeda’s closing share price on April 23, according to a statement. In pounds, that’s the same value as a preliminary agreement the companies reached last month.
To help fund the cash portion of the deal, Takeda said it has secured a bridge loan facility of $31 billion with JPMorgan Chase Bank NA, Sumitomo Mitsui Banking Corp. and MUFG Bank Ltd., among others. Shire shares rose as much as 5.7 percent early in London, while Takeda rose 4 percent in Tokyo before the deal was announced.
The acquisition would be the largest ever for a Japanese company, and vault Takeda into the top 10 of global pharmaceutical giants.
CEO Christophe Weber, the first foreigner to lead the 237-year-old Japanese company, is seeking growth in new markets amid patent expirations and drug pricing pressures at home.
“Shire’s highly complementary product portfolio and pipeline, as well as experienced employees, will accelerate our transformation for a stronger Takeda,” Weber said in the statement.
With few late-stage experimental drugs in its own pipeline, Takeda needs lucrative new therapies. A Shire takeover brings Takeda treatments for rare diseases such as hemophilia — a field that’s luring a growing number of drugmakers who can charge more for unique life-saving drugs than for routine treatment.
The deal increases Takeda’s exposure to the US, the world’s biggest pharmaceutical market. Shire, based in Lexington, Massachusetts, gets more than two-thirds of its revenue from North America. Takeda generates only 30 percent of its sales from the region.

Multiple Bids
The Japanese drugmaker increased its bid for Shire multiple times over the past month. The companies indicated in late April they had reached a preliminary deal valued at 46 billion pounds, or $64 billion based on a stronger exchange rate for the pound at the time.
Takeda faced a deadline on Tuesday set by UK regulators to make a firm offer for Shire, walk away or extend the deadline.
The agreement offers $30.33 in cash and either 0.839 new Takeda shares or 1.678 Takeda American depositary receipts. It represents a 60 percent premium to Shire’s closing price
on March 27, before Takeda disclosed its interest.
While the deal would boost Takeda’s earnings potential, it also comes with risks. Japanese investors have worried about the hefty debt, with Moody’s Investors Service warning last month that Takeda could face a multiple-step credit downgrade due to a “spike in leverage.”
Takeda said the deal will save about $600 million in duplicated research and development costs. The company expects $1.4 billion in overall savings by the third year.
“The cost synergies seem to be much bigger than expected in the next three years,” Credit Suisse analyst Fumiyoshi Sakai said. Takeda, which has seen its market value slide to $34 billion since announcing its interest, is taking over a much bigger rival. Shire’s shares have soared 31 percent, giving the company a market capitalisation of about $50 billion.