Shire says willing to recommend Takeda's $64 billion offer to shareholders

By Ben Martin and Carl O'Donnell

The development, first reported by Reuters, represents a major breakthrough for the companies in their negotiations, following a pursuit that started on March 28 when Takeda said it was considering a bid for Shire. Since then, Takeda has made five offers, the latest on Tuesday.

Shire said in a statement it had agreed to extend a Wednesday regulatory deadline for the deal talks to conclude to May 8 in order to allow Takeda to carry out more due diligence and firm up its bid. Shire added that the deadline could be extended further, if needed.

Takeda's shares slid almost 6 percent in early Tokyo trade on Wednesday as investors fretted over its ability to finance the cash and stock deal.

Any deal between the two companies is still subject to the resolution of several issues, including completion of due diligence by Shire on Takeda, Shire said.

Takeda added in its own statement that it intended to maintain its dividend policy and investment-grade credit rating following the deal.

Shire focuses on treatments for rare diseases and attention deficit hyperactivity disorder. A deal would be the largest ever overseas acquisition by a Japanese company and propel Takeda, led by Frenchman Christophe Weber, into the top ranks of global drugmakers.

It would significantly boost Takeda's position in gastrointestinal disorders, neuroscience, and rare diseases, including a blockbuster haemophilia franchise.

But the transaction would be a huge financial stretch, since Shire is worth considerably more than the Japanese group. Ambitious cost cutting will be required to make the deal pay.

Dealmaking has surged in the drug industry this year as large players look for promising assets to improve their pipelines. A Takeda-Shire transaction would be by far the biggest. Shire has long been seen as a likely takeover target and was nearly bought by U.S. drugmaker AbbVie Inc in 2014, until U.S. tax rule changes caused the deal to fall apart. Shire also has a track record of acquisitions, but its biggest ever deal - the $32 billion purchase of Baxalta in 2016 - was widely criticized by shareholders.

Dublin-based Shire, a member of Britain's benchmark FTSE 100 stock index, said Takeda's fifth offer was worth 49.01 pounds per share, comprised of the equivalent of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash. Under these terms, Shire shareholders would own half of the combined company.

ALLERGAN BOWED OUT

Allergan Plc , the U.S. maker of Botox, had been considering a rival bid for Shire but ruled itself out of making an offer last week.

Shire also announced last week it was selling its oncology business to unlisted French drugmaker Servier for $2.4 billion.

Takeda has lost more than 17 percent since the news broke that it was considering a bid for Shire, reducing its market value to 3.6 trillion yen ($33 billion).

Takeda investors have been sceptical about the merits of a Shire deal, given the size of the potential purchase and the likely need for a large share issue, which could be highly dilutive.

Weber was promoted to CEO in 2015, becoming the drugmaker's first non-Japanese boss.

Shire traces its roots back to 1986, when it began as a seller of calcium supplements to treat osteoporosis, operating from an office above a shop in Hampshire. Since then it has grown rapidly through acquisitions to generate revenues of about $15.2 billion last year.

(Reporting by Ben Martin in London and Carl O'Donnell in New York, Additional reporting by Padraic Halpin in Dublin and Ben Hirschler in New York and Sam Nussey in Tokyo; Editing by Richard Chang, Rosalba O'Brien and Edwina Gibbs)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)