Bidding war looms over Shire after £42.4bn Takeda offer rejected
Shares in Irish drugs group jump as Allergan says it is also considering move
A potential battle for control of Shire broke into the open on Thursday after the Irish drugmaker rejected a £42.4bn takeover offer from Japanese rival Takeda and Botox-maker Allergan disclosed it was considering a run at the company.
Shares of the Irish group leapt 5.9 per cent on expectations of a bidding war, which would break out in the middle of what is already the busiest run of acquisition activity the pharma industry has ever seen.
If a deal with Takeda — or another suitor — is consummated at current valuations, it would rank as one of the largest the sector has ever seen, trailing Pfizer’s $112bn takeover of Warner Lambert in 2000, data from Dealogic showed. Including the value of Shire’s debt, the deal is worth roughly $81bn, according to the data provider.
Shire turned down Takeda’s bid for the group, which was its third attempt to win over the company’s board and valued the group at £46.50 a share. Under the proposal, each owner of Shire stock would get £17.75 in cash and £28.75 in new Takeda shares, in what would be the largest-ever outbound deal by a Japanese company.
Takeda said talks between the two companies were continuing, but attempted to play down expectations it would raise its offer significantly higher, saying it remained “disciplined” about the terms and intended to “maintain its well-established dividend policy and investment-grade credit rating”.
Shire said Takeda’s two previous offers were at £44 a share and £45.50 a share. It noted that, based on the most recent proposal and Takeda’s current market capitalisation, current Shire shareholders would own about 51 per cent of the “enlarged Takeda”.
The Irish drugmaker said it had “thoroughly considered” the third proposal at a meeting on April 14, but had “unanimously rejected it”, arguing its strong growth prospects and drug pipeline meant the price “continues to significantly undervalue the company”.
Allergan publicly entered the fray just hours later, disclosing it was considering a bid but had not yet made an official offer. While it cautioned that it might not present Shire with an offer, it added that it had already hired financial advisers to assist it in a review of potential acquisitions or disposals.
Shire’s advisers have continued “a dialogue” with Takeda to determine if a more attractive offer will be made. Shire did not comment on Allergan’s expression of interest. The FTSE 100 group closed at £39.75 in London trading, giving it a market capitalisation of £36.5bn.
Earlier this week, Shire agreed to sell its oncology business for $2.4bn in cash to Servier, a French pharmaceutical group. The move was seen by some as a defensive tactic to repel Takeda, which revealed three weeks ago that it was considering a bid for Shire.
Some analysts believe the Servier transaction suggests that Shire has been undervalued, and the deal potentially strengthens its hand in negotiating with its Japanese suitor.
Takeda has been aggressively trying to expand abroad in recent years as it seeks growth from outside its shrinking home market. It has been hunting particularly for companies developing drugs for cancer, gastrointestinal conditions and diseases of the central nervous system, such as Alzheimer’s.
Last year, Takeda acquired US oncology group Ariad Pharmaceuticals for $5.2bn and it later tried to acquire Valeant, the Canadian drugmaker, for around $10bn. but the talks collapsed over price. In 2011, it acquired Nycomed, the Swiss drugs company, for $13.7bn.
Japanese companies have been encouraged to acquire foreign assets under prime minister Shinzo Abe’s drive to reinvigorate the country’s economy with his stimulative “Abenomics” reforms.
Takeda’s shareholders have seemed less enthusiastic in recent weeks. Its shares have declined almost 8 per cent since it revealed its interest in Shire in March as investors worried about the increasing level of its interest-bearing debt — totalling over $10bn — and the risk of a dilutive share issuance to finance the new deal.
A tie-up is likely to be complicated by the fact Takeda’s market capitalisation is significantly smaller than Shire’s. Given that asymmetry, some analysts have suggested any agreement reached between the two parties would have to be in the form of a merger.
Takeda was forced to disclose its interest last month after coming under pressure from the UK Takeover Panel, following sharp movements in Shire’s share price.