Shares in Tokyo-listed Takeda tumbled yesterday after it raised its offer for Irish pharmaceutical company Shire to £46 billion (US$64 billion), which would represent the largest-ever foreign takeover by a Japanese firm.
Shire was “willing to recommend the revised proposal to Shire shareholders subject to satisfactory resolution of the other terms of the possible offer,” the London-listed company said.
The latest bid follows a string of lower offers rejected by Shire over the past month.
It comes as Takeda looks to expand abroad in the face of an expected drug price drop at home.
The buyout would be a smart move for Takeda as it looks to diversify, and could pay off in the long-term, analysts said.
However, the news sent Takeda shares plunging more than nine percent in Tokyo at one point in the morning, with investors worried it would overextend the firm’s finances. At the close it was down 7.02 percent to ¥4,510, while Shire opened in London trade up 2.80 percent at £40.40.
Shire, in a statement on Tuesday night set a new May 8 deadline for the conclusion of negotiations.
The offer is equivalent to £49 a share, Shire said, and represents a 60 percent premium to its closing price on March 27, before Takeda made its interest known.
Shire said that on completion of the deal, shareholders would own about 50 percent of the enlarged Takeda, while the new Takeda shares would be listed in Japan and the US.
Shire on Friday last week rejected Takeda’s fourth offer in a month, worth £42.8 billion, saying it was too low.
Botox maker Allergan last week said it was considering making a counteroffer for Shire, raising the prospect of a bidding war, but then confirmed it would not go ahead.
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 drugmakers in particular are facing pressure in the domestic market as the government tries to cut prices of many branded medicines and increase the focus on cheaper generics to curb health spending as the population ages rapidly.
Takeda, led by Christophe Weber, has been actively looking overseas for acquisitions.
In 2011, it took over Swiss rival Nycomed for 9.6 billion euros (US$13.6 billion at the time).
Notwithstanding the negative initial market reaction, the takeover would likely be good for Takeda, Rakuten Securities chief strategist Masayuki Kubota said.
“It would be the biggest-ever takeover by a Japanese company and it’s natural for that to spawn worries” because a failed buyout could cause huge losses, he said.
However, Shire offered an attractive portfolio, Kubota added.
“They have a lot of treatments for rare diseases, where the barriers to entry for other companies are very high. Their profitability is high,” he said.
Takeda is right to take advantage of its ample cash flow and Japan’s low interest rates, Kubota said. “It may look expensive short-term, but it will bring good benefits over the longer term,” he said.
“It would also enhance its global reach,” Credit Suisse analyst Fumiyoshi Sakai said, adding that it would give Takeda access to “research and development in the field of digestive systems, mental illness and rare diseases where Takeda has wanted collaboration.”
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