Japan's Takeda shares drop as investors fret over Shire pursuit

[April 20, 2018]   By Sam Nussey

TOKYO (Reuters) - Takeda Pharmaceutical Co Ltd shares lost almost 5 percent of their value on Friday as investors fretted over the size of any deal the Japanese firm would have to make to seal its record-breaking purchase of London-listed Shire PLC.

Shire late on Thursday said it had rejected Takeda's $63 billion cash-and-stock conditional offer, saying the offer - and two previous offers - significantly undervalued its growth prospects and drugs in development. The rare disease drugmaker said talks continued over "whether a further, more attractive, proposal may be forthcoming."

Several analysts said Takeda, Japan's biggest drugmaker by sales, will need to substantially raise the cash component of its offer make it attractive to Shire shareholders.

Takeda's shares closed down 4.67 percent in afternoon trade. The stock is down more than 12 percent since news of its initial bid emerged.

A successful bid would be the most radical step yet by Chief Executive Christophe Weber, propelling Takeda into the top ranks of global drugmakers with what would be Japan's largest-ever outbound deal.

Other cross-border deals chased down by the Frenchman include the $5.20 billion acquisition of U.S. cancer drug maker Ariad Pharmaceuticals Inc last year, as well as the purchase of Belgian biotech group TiGenix NV announced in January.

For Shire, Takeda's most recent rejected offer of 46.50 pounds per share - made on April 12 - comprised 17.75 pounds in cash, paid in U.S. dollars, and 28.75 pounds worth of new Takeda shares. The cash portion, at 38 percent, compared with the 36 percent originally offered.

Vitamins made by Shire are displayed at a chemist's in northwest London, Britain, July 11, 2014. REUTERS/Suzanne Plunkett/File Photo

Takeda has room to raise its cash offer but "we do not see a lot of margin," Daiwa Securities analyst Kazuaki Hashiguchi wrote in a client note.

The deal would also be a financial stretch since Shire, with a market value of over 36.6 billion pounds ($51.5 billion), is worth more than Takeda, which has a market capitalization of 3.9 trillion yen ($36.24 billion).

Regarding new Takeda shares, analysts said any issuance could lead to a further drop in demand for Takeda stock. They also said there were concerns over whether Takeda may end up overpaying - an accusation frequently leveled at Japanese firms investing overseas.

CLSA analyst Stephen Barker, however, wrote in a client note earlier in the week that a successful bid would likely see Takeda's share price rise as the deal would greatly increase the Japanese drugmaker's earnings per share.

Under British takeover rules, Takeda has until April 25 to make a firm offer or walk away.

British Botox maker Allergan PLC also said it was considering an offer for Shire before deciding otherwise.

(Reporting by Sam Nussey; Editing by Edwina Gibbs and Christopher Cushing)

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