Japanese Takeda to acquire Shire for $62bn

Analysts say the deal would be a smart move by Takeda as it looks to diversify but there are also concerns that it could be overextending itself financially

After several improved bids the board of Irish biopharmaceutical firm Shire agreed to a £46 takeover bid by Japanese drug maker Takeda which will propel it into the position of the world's largest drug maker in the rare diseases business.

On Tuesday, Takeda pledged to quickly reduce the debt and maintain the company's investment grade credit reading.

Yet buying Shire is a stretch for the much smaller Takeda, which will borrow $30.85 billion from J.P. Morgan Chase, Sumitomo Mitsui, MUFG Bank and others to fund the takeover.

A fair share of industry watchers initially expected that Takeda wouldn't make it to the finish line since snapping up Shire would mean taking on a hefty debt load.

In particular, Shire will give Takeda access to research and development in fields the Japanese firm has long sought, including digestive systems, mental illness and rare diseases.

The companies eventually expect to realize about $1.4 billion in annual cost savings from combining, the majority of which will come from reducing duplicative functions in sales and marketing, Takeda said.

The transaction gives Takeda, a maker of cancer and gastroenterology drugs, greater access to the United States market, while Shire will get greater exposure in Japan and emerging markets. MID AND LARGE CAP RISERS AND FALLERSJapanese pharma colossus Takeda and rare diseases company Shire (SHP) reached a takeover agreement for the acquisition of Shire, which rose 3.7% to £40.According to Takeda, each Shire shareholder can receive $30.33 for each share and either 0.839 new Takeda shares or 1.678 in Takeda American depositary receipts, implying a value of £48.17 per Shire share.

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The total deal is consistent with Takeda's fifth proposal and values Dublin-based Shire at 49.01 pounds, or about $66.21, per share.

Jefferies analysts said they expected the shares to trade at a relatively wide discount to the offer, given the large stock component and the fact that the deal is not expected to close until the first half of 2019.

Takeda will become the only pharma company with dual listings in Tokyo and NY.

Under CEO Weber, Takeda has looked outside of its home market for opportunities to expand in its core areas of gastroenterology, cancer and neuroscience.

If it is approved by shareholders of both companies, Shire investors will own about half of the combined group, which will be listed on the Tokyo stock exchange.

"We firmly believe that this combination recognizes the strong growth potential of our leading products and innovative pipeline and is in the best interests of our shareholders, our patients and the communities we serve", Shire Chairman Susan Kilsby said in the statement.

In a separate statement today, Takeda said it will continue to focus on growing its oncology portfolio, which along with its hematology holdings expanded past year when Takeda acquired Ariad Pharmaceuticals for $5.2 billion.

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