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MarketScreener Homepage  >  Equities  >  Tokyo  >  Takeda Pharmaceutical Co Ltd    4502   JP3463000004

TAKEDA PHARMACEUTICAL CO LTD

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Takeda clears key hurdle as investors back $59 billion Shire deal

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12/05/2018 | 10:37am EDT
FILE PHOTO: The logo of Takeda Pharmaceutical Co. is displayed at the company's news conference venue in Tokyo

OSAKA (Reuters) - Takeda Pharmaceutical has won shareholder approval for its $59 billion takeover of London-listed Shire, creating a global powerhouse that has a stronger drugs pipeline but is also saddled with massive debt.

Takeda will be joining the ranks of the world's top 10 drugmakers and gaining expertise in rare diseases through the deal, the biggest overseas acquisition by a Japanese company.

It will also become one of the most indebted. In addition to issuing new shares, the company has secured $30.9 billion in bank loans.

The company's high debt levels were a top concern for Takeda shareholders who gathered at an extraordinary meeting in Osaka, western Japan, although almost 90 percent of them voted to approve the deal as expected.

"I want to keep my Takeda shares into the future, but now I am worried about further declines in the share price," said Satoshi Ito, a 75-year-old shareholder. He abstained from voting.

Separate meetings of Shire shareholders later on Wednesday also secured overwhelming support for the transaction.

Takeda shares have fallen around 25 percent since the drugmaker revealed its interest in the acquisition in March. They closed up 1 percent at 4,240 yen on Wednesday.

Shire shares gained 3.2 percent to 46.95 pounds on relief Takeda's board had won its nine-month battle to persuade shareholders of the merits of the tie-up.

The acquisition is expected to close on Jan. 8. It now only requires sanctioning at a court hearing expected to be held on Jan. 3.

DEBTS, DESCENDANTS AND DIVESTITURES

A small group of Takeda investors, including descendants of the company's founder, had actively opposed the deal.

"We are definitely against this because the financial risks are too great and the expected benefits are quite limited," said Kazuhisa Takeda, a former director of the drugmaker and a member of the founding family, ahead of the meeting.

"I think M&A is quite necessary for Takeda's future but Shire is not the answer."

Chief Executive Christophe Weber has promised to turn the deal profitable by slashing costs. It predicts annual savings of at least $1.4 billion three years after completion, and expects to boost underlying earnings significantly from the first full year after closing.

Takeda also has a plan to sell up to $10 billion worth of non-core assets to pay back debt. Andy Plump, Takeda's global head of R&D, told Reuters that accelerated deleveraging was needed to keep its credit rating at a safe level.

"We have a plan for divestiture that gets us to a place in three to five years that our credit agencies are OK with. Our credit rating is likely to tick down a notch, but still above junk bond status, which is critical for us," he said in an interview.

Analysts have said it may be difficult to integrate the two companies. Toshiba's acquisition of Westinghouse over a decade ago and Japan Post Holdings' $4.9 billion bet on Toll Holdings are widely seen as examples of many Japanese companies having paid high valuations in cross-border deals only to face massive write-downs later.

But they also said Takeda has little choice but to seek growth abroad, with industry pressure to gain access to cutting-edge treatments amid declining revenue from older drugs that must compete with cheaper generics.

Even with the acquisition of Shire, some said Takeda will need to bolster its lineup of experimental therapies to compete in the longer term.

Shire's haemophilia business, for example, is already starting to face strong pressure from a competing drug being marketed by Roche as well as new gene therapies now in development.

"It's crucial whether the drugmaker can reinvest profits from the deal into seeds for developing future drugs," said Kazuaki Hashiguchi, a senior drugs analyst at Daiwa Securities.

"The benefits of the deal will last for a limited time, as no treatments can avoid patent expiration."

(Reporting by Takashi Umekawa, with additional reporting by Julie Steenhuysen in Chicago and Ben Hirschler in London; Editing by Muralikumar Anantharaman/Mark Potter/Susan Fenton)

By Takashi Umekawa

Stocks mentioned in the article
ChangeLast1st jan.
JAPAN POST HOLDINGS CO LTD -1.30% 1216 End-of-day quote.-2.80%
ROCHE HOLDING LTD. -1.09% 263.4 Delayed Quote.8.22%
SHIRE 2.42% 4690 Delayed Quote.0.00%
TAKEDA PHARMACEUTICAL CO LTD -0.27% 4059 End-of-day quote.12.13%
TOSHIBA CORP -0.41% 3640 End-of-day quote.20.13%
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Financials (JPY)
Sales 2019 2 334 B
EBIT 2019 359 B
Net income 2019 189 B
Debt 2019 5 675 B
Yield 2019 4,43%
P/E ratio 2019 28,74
P/E ratio 2020
EV / Sales 2019 5,15x
EV / Sales 2020 3,37x
Capitalization 6 352 B
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Mean consensus OUTPERFORM
Number of Analysts 12
Average target price 5 765  JPY
Spread / Average Target 42%
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Managers
NameTitle
Christophe Weber President, CEO & Representative Director
Costa Saroukos Chief Financial Officer
Andrew S. Plump Director, Chief Medical & Scientific Officer
Yasuhiko Yamanaka Managing Director & Head-Globalization
Masato Iwasaki Director & President-Japan Pharma Business Unit
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