Takeda – Shire merger, deal done. Takeda shareholders also give the green light
PHARMASTAR – Wednesday 5 December 2018
At an extraordinary public meeting in Osaka, western Japan, more than 90 percent of Takeda Pharmaceutical's shareholders approved the $59 billion acquisition of Shire. Takeda will thus enter the top ten of the most important pharmaceutical companies in the world and will be the world leader in rare diseases.
At an extraordinary public meeting in Osaka, western Japan, more than 90 percent of Takeda Pharmaceutical's shareholders approved the $59 billion acquisition of Shire.
Takeda will thus enter the top ten of the most important pharmaceutical companies in the world and through the agreement, the largest foreign acquisition by a Japanese company, will become the world leader in rare diseases.
Wednesday's approval was widely expected, even though a small group of investors actively opposed it. "We are decidedly against it because the financial risks are too great and the expected benefits are quite limited," said Kazuhisa Takeda, former director of the pharmaceutical company and member of the founding family, before the meeting. "I think M&A is necessary for Takeda's future, but Shire is not the answer."
It is estimated that the merger will triple Takeda's EBITDA (earnings before interest, taxes, depreciation and amortization), the most important measure of a company's profitability. Last year, Shire reported net profits of $4.2 billion, two and a half times those of Takeda.
The CEO of Takeda, Christophe Weber, promised to make the deal profitable even by cutting costs. Three years after the completion of the deal, the manager expects annual savings of at least $1.4 billion and also expects a significant increase in profits starting in the first year after the closing of the deal.
To finance the merger between the two companies, Takeda had to find a huge mass of economic resources, in part through the issue of new shares and with 30.9 billion dollars in bank loans. It won't be an easy challenge. Takeda shares are down about 25% since the Japanese drugmaker revealed its interest in a takeover in March, and investors worry whether the company can meet high financing costs and the challenges of integration.
To pay down the debt, Takeda plans to dispose of up to $10 billion of non-core assets. Andy Plump, Takeda's global head of R&D, told Reuters “We have a decommissioning plan that will get us out of business within three to five years…. our credit bureaus agree. Our credit rating is set to go down, but it will still be above junk bond status, which is critical to us,” he said in an interview.
Analysts said it could be difficult to integrate the two companies but also agreed that Takeda had no choice but to seek to grow overseas, given the pressure to develop cutting-edge treatments amid falling revenues from older drugs that have to compete with cheaper generics.
Even with the Shire acquisition, Takeda will need to strengthen its range of investigational therapies to compete over the long term. "It is imperative that the Japanese company can reinvest the profits from the deal into future drug development," said Kazuaki Hashiguchi, senior analyst at Daiwa Securities. "The benefits of the agreement will last for a limited period of time, as no treatment can prevent the patent from expiring." In short, the challenge is continuous, but we already knew this.
Note:
Christophe Weber, 52, CEO & Representative Director Takeda Pharmaceutical Company Limited received total compensation of ¥905,000,000 or €7,060,000 in the 2017 fiscal year [source Bloomberg]
