Japan's biggest ever deal: Takeda buys Shire for $62 billion

Analysts say the deal would be a smart move by Takeda as it looks to diversify but there are also concerns that it could be overextending itself financially

Japanese pharmaceutical company Takeda announced Tuesday it would buy Shire for $62.4 billion in cash and stock in a deal that could cause some uncertainty at Takeda's USA headquarters in Deerfield. Weber, a Frenchman who is the first foreigner to lead the 237-year-old firm, is seeking growth in new markets amid patent expirations and drug pricing pressures at home.

The deal should help Takeda pivot away from its home base to more lucrative markets like the US and Europe, and add new drugs to its shrinking pool of patent-protected products. It values Dublin-based Shire at £48.17 per share based on the current foreign exchange rate between United Kingdom sterling and the Japanese yen or at £49.01 per share based on the exchange rate on April 23, when Shire indicated provisional acceptance of Takeda's offering. The transaction has been approved by both companies' boards and values Shire at around $62 billion.

Shire's stock was up about 1 percent to $163 in Tuesday's pre-market session. It represents a premium of about 60 percent to Shire's share price immediately before Takeda expressed an interest. The deal is also subject to approval by Takeda's offer document. Shire, with USA headquarters in MA, gets more than two-thirds of its revenue from North America. Japanese investors have anxious about the hefty debt.

S&P Global Ratings placed Takeda on a watch and warned it may lower the company's ratings by up to two notches, it said in a statement on Tuesday.

The Japanese company predicts annual cost synergies of at least $1.4 billion three years after completion, including $600 million in research and development costs, and the deal is expected to boost underlying earnings significantly from the first full year after closing. The company was saddled with debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal, while generic drug makers have stepped up competition. Shire's shares have soared 31 percent, giving the company a market capitalization of about $50 billion.

It's also the largest takeover ever carried out by a Japanese company, according to data provider Dealogic. Its stock (London:SHP) closed in London at £4.0345, a gain of 4.6 percent on the previous close, reflecting continued uncertainties about the feasibility of the deal and the large component of Takeda paper contained therein. Past year it bought Ariad Pharmaceuticals of Cambridge, Massachusetts.

Jobs will go, with the group's combined 52,000 workforce likely to be reduced by 6-7 percent.

Takeda yesterday said it would maintain its global headquarters in Japan and evaluate consolidating Shire's operations into Takeda's in the Boston area, Switzerland and Singapore, without referencing the Irish operations.

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