Takeda shareholders say yes for $62 bn Shire deal

Takeda Pharmaceutical shareholders approved on Wednesday its $59 billion takeover of London-listed Shire, creating a global powerhouse with a stronger drugs pipeline but one that is 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 shareholders who gathered at an extraordinary meeting in Osaka, western Japan, although almost 90 percent of them voted to approve the deal as expected.

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.

We are delighted that our shareholders have given their strong support to our acquisition of Shire,” said Takeda CEO Christophe Weber.

Analysts have said the buyout would be a smart move by Takeda as it looks to diversify, and could pay off in the long-term, but it has also raised concerns that the Japanese firm could be overextending itself financially.

Takeda plans to finance the 46-billion-pound ($58.4 billion) buyout through issuing new shares in exchange for Shire stock, bank loans and bond issuance.

Shares in Takeda closed up 1.07 percent at 4,240 yen on the Tokyo Stock Exchange as investors cheered the shareholders’ approval.

“The approval prompted buybacks,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Institute.

“The company averted the worst-case scenario in which opposition to the deal wins and throws its business planning into a mess,” he told AFP.

But Sengoku noted the price was still down more than 30 percent from around 6,500 yen at the start of the year as investors worried over a dilution of the stock’s value due to the planned issuance of new shares.

“From here, market players will be watching details of the deal, including exactly how many shares will be issued,” he said.

The buyout is the latest in a flurry of merger and acquisition activity in the pharmaceutical industry as traditional players see profits eroded by competition from generic medicines.

Japanese firms in particular are facing pressure domestically as the government tries to cut prices of many branded drugs and increase the focus on cheaper generics to curb health spending as the population ages rapidly.

Takeda, led by Frenchman Weber, has been actively looking overseas for acquisitions. In 2011 it took over Swiss rival Nycomed for 9.6 billion euros ($13.6 billion at the time).

Analysts have described Shire as an attractive target for Takeda, with a portfolio of existing treatments in fields where the barriers to entry are high and profits large.

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 new firm would be “more competitive, agile, highly profitable, and therefore more resilient… poised to deliver highly innovative medicines and transformative care to patients around the world”, said Weber.

The deal is by far the largest acquisition of a foreign firm by a Japanese company, dwarfing SoftBank Group’s 2016 purchase of Britain’s ARM Holdings in a $24.3 billion deal.

It falls well short, however, of breaking international records.