Shire/Takeda: Takeda’s dissident group mulling sending letters to individual shareholders to block deal
05 OCT 2018
A group of Takeda Pharmaceutical [TYO:4502] shareholders trying to derail the Japanese group’s GBP 46bn acquisition of Shire [LON: SHP] is considering dispatching letters to individual shareholders urging them to vote against the planned acquisition’s equity raise at its upcoming EGM, a leading member of the group told this news service.
To this end, the 130-member group, which holds 1% of the drugmaker’s shares, will seek to obtain the list of shareholders from Takeda once the name of shareholders of record on 19 October is confirmed, said the member, though he did not entirely rule out the possibility of a proxy fight.
At the same time, the group is also considering urging asset management shareholders affiliated with Takeda’s cross shareholders like Nippon Life Insurance, its financial advisor Nomura Securities and major lenders like Sumitomo Mitsui Financial Group [TYO: 8306] to refrain from voting. Asset managers often find it difficult to vote against a company's proposals if their parents are major lenders or financial advisors or life insurance companies for the company, the leading member of the group said.
The member said this persuasion will be done not by directly contacting with these asset managers, but through its own website. The group will also try to persuade proxy advisor Institutional Shareholders Services (ISS) to incorporate into their recommendations a guideline urging asset managers not to vote for the deal where there is clearly conflict of interest.
Likewise, asset managers of Government Pension Investment Fund Japan (GPIF) -Takeda’s largest shareholder – should abstain from voting because almost all of them are affiliates of either Takeda’s financial advisor or lenders or cross shareholders, the member said.
For example, if an asset manager has already lost some of its clients’ money because the share price of Takeda has fallen as much as 30% year to date, that manager should not be voting in favor of the deal. “It is not right to vote in favor of the deal that has caused the huge loss for their customers,” said the member. However, the asset manager may normally find it difficult to vote against Takeda's proposal because its parent is a financial adviser for the drugmaker.
This week, the dissident group sent a letter to President Christophe Weber seeking the disclosure of its debt repayment schedule, the minutes from board of director meetings and more detailed clarification as to why the Shire acquisition is the only means to achieve Takeda’s future growth. The group has asked Takeda to respond to these questions by 31 October.
To this end, the 130-member group, which holds 1% of the drugmaker’s shares, will seek to obtain the list of shareholders from Takeda once the name of shareholders of record on 19 October is confirmed, said the member, though he did not entirely rule out the possibility of a proxy fight.
At the same time, the group is also considering urging asset management shareholders affiliated with Takeda’s cross shareholders like Nippon Life Insurance, its financial advisor Nomura Securities and major lenders like Sumitomo Mitsui Financial Group [TYO: 8306] to refrain from voting. Asset managers often find it difficult to vote against a company's proposals if their parents are major lenders or financial advisors or life insurance companies for the company, the leading member of the group said.
The member said this persuasion will be done not by directly contacting with these asset managers, but through its own website. The group will also try to persuade proxy advisor Institutional Shareholders Services (ISS) to incorporate into their recommendations a guideline urging asset managers not to vote for the deal where there is clearly conflict of interest.
Likewise, asset managers of Government Pension Investment Fund Japan (GPIF) -Takeda’s largest shareholder – should abstain from voting because almost all of them are affiliates of either Takeda’s financial advisor or lenders or cross shareholders, the member said.
For example, if an asset manager has already lost some of its clients’ money because the share price of Takeda has fallen as much as 30% year to date, that manager should not be voting in favor of the deal. “It is not right to vote in favor of the deal that has caused the huge loss for their customers,” said the member. However, the asset manager may normally find it difficult to vote against Takeda's proposal because its parent is a financial adviser for the drugmaker.
This week, the dissident group sent a letter to President Christophe Weber seeking the disclosure of its debt repayment schedule, the minutes from board of director meetings and more detailed clarification as to why the Shire acquisition is the only means to achieve Takeda’s future growth. The group has asked Takeda to respond to these questions by 31 October.
In the open letter, the group also asked why Takeda decided to pay such a huge premium of 65% to Shire shareholders at a time when the UK pharmaceutical company is set to compete in its core hemophilia business with Hemlibra, developed by Chugai [TYO:4519] and launched by Roche [VTX: ROG].
The member said Takeda needs to borrow as much as JPY 6trn (USD 52.6bn or GBP 40.5bn) for the acquisition. But the company has not even disclosed its debt repayment schedules and its forecasted earnings-per-share (EPS), said the member of the group. The only thing the shareholders know is EBITDA to weigh the pros and cons of this acquisition.
“This is just like requesting shareholders to vote blindfolded,” he said. He argues EBITDA has a defect of not being able to reflect losses from excessive R&D and M&A.
A Takeda spokesperson said almost all these items in the open letter are not answerable until the closing date under the UK takeover code.
The member said Takeda needs to borrow as much as JPY 6trn (USD 52.6bn or GBP 40.5bn) for the acquisition. But the company has not even disclosed its debt repayment schedules and its forecasted earnings-per-share (EPS), said the member of the group. The only thing the shareholders know is EBITDA to weigh the pros and cons of this acquisition.
“This is just like requesting shareholders to vote blindfolded,” he said. He argues EBITDA has a defect of not being able to reflect losses from excessive R&D and M&A.
A Takeda spokesperson said almost all these items in the open letter are not answerable until the closing date under the UK takeover code.
“Clearly, it is not possible to answer all these by the 31 October deadline [set by the dissident group]. Nevertheless, we are still studying how to answer them because there must be a number of ways to respond to them,” the spokesperson added.
Takeda has set 19 October as the record date for the EGM, allowing the drugmaker to have the meeting within the three months ending 18 January 2019. Shareholders at the meeting will be able to vote on the necessary matters relating to the proposed Shire acquisition, including new share offerings.
Takeda has set 19 October as the record date for the EGM, allowing the drugmaker to have the meeting within the three months ending 18 January 2019. Shareholders at the meeting will be able to vote on the necessary matters relating to the proposed Shire acquisition, including new share offerings.