Shire recommends Takeda’s £46bn bid

It looks like the biggest pharma merger of the year so far is on, after Shire recommended shareholders accept a bid from Takeda worth around £46 billion.

After a series of bids from the Japanese pharma, Shire’s board has decided to accept a bid of £49 per share, meeting today’s deadline under the UK takeover code when a bid had to be formalised.

Shares in both companies were down, with Takeda’s value sliding heavily because of investors’ concerns over the risks of such a big merger.

The companies now have until May 8 under an extended deadline to thrash out the finer points of the deal and while Takeda kicks the tyres at Shire before its board gives final approval.

The proposal accepted by Shire’s board came in late yesterday, and comprises £27.26 in new Takeda shares, and £21.75 in cash.

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.

Valuing Shire at around $64 billion, shareholders will be entitled to any dividends from Shire until the transaction is completed.

As with all the previous bids, the merged company would be listed in Japan and the US.

There is still work to do though – other terms of the revised proposal need to be agreed, Takeda must complete its due diligence review, and both boards must approve the deal.

If agreed, the deal would turn the tables on Shire, which has been on its own acquisition spree in the last few years.

Shire CEO Flemming Ornskov’s biggest acquisition was the takeover of rare disease competitor Baxalta in 2016 for $32 billion.

However since then the company’s performance has disappointed investors, and rumours about it being a potential takeover target itself have grown.

A takeover would be a continuation of Takeda’s expansion plans under CEO Christophe Weber, the company’s first ever non-Japanese leader, who has set himself the task of reinvigorating the firm.

Takeda bought US biotech Ariad Pharma for $4.7billion last year, although many market commentators felt this was overpriced.

Japanese companies have until recent years shied away from major M&A deals, but driving Takeda’s M&A strategy is a shrinking home market.

This isn’t the first M&A bid for Shire – a $52 billion takeover by AbbVie had been agreed but was terminated in 2014 because of a change in US tax rules.

 

 

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