Takeda/Japan activism: importunate imports
Unhappy shareholders are right to resist the purchase of Shire
Japanese companies sometimes use imports as performance enhancers. One of these, Takeda boss Christophe Weber, now finds himself at odds with another — investor activism. The Frenchman must believe he has contained opposition to a takeover of Irish rival Shire. The Japanese pharmaceuticals group has brought forward a meeting to approve financing. A stiff censure vote is merited, all the same.
The reason is that the purchase of Shire represents a less palatable import: a blockbuster leveraged takeover. Here, debt and scale amplify the perils created by overpayment or a bungled integration. The deal, which has an enterprise value of more than $70bn, would leave Takeda with borrowings equivalent to five times cash earnings.
In June, Takeda fended off a move to make big takeovers dependent on investor approval. The level of dissent — 10 per cent of stock voted — was small by US standards. However, Japanese investors are new to interventionism. The government has endorsed this as a stimulus to better governance.
At one time, the only dissenting voices heard in Japan’s investors meetings were those of “sokaiya”. These crooks misbehaved unless paid off. Dissent has since gone mainstream. Criticism of anti-takeover measures prompted around 100 big companies to start dismantling them this year.
Unhappy shareholders are right to resist the purchase of Shire. Not least, it will help establish what a censure vote looks like. In the UK, a board knows it has a problem when votes equivalent to a quarter of shares are against a policy or an appointment.
Takeda shares have dropped 18 per cent since the bid was first reported. Part-payment in shares means the price has fallen too, from $68 to around $63 per share. Low Japanese interest rates mean the group can shoulder heavy debts. And there is the rub. Japan’s governance push targets returns on equity of 10 per cent, or above. Leveraged takeovers are an easy way to hit these — until rates spike up.