LONDON / NEW YORK / TOKYO (Reuters) – The rare disease specialist Shire ( SHP.L ) said Wednesday he was ready to offer a sweetened $ 64 billion offer from Takeda Pharmaceutical from Japan to recommend Co ( 4502.T ) to shareholders, which would be the largest acquisition of a pharmaceutical company this year.
But Takeda has extended its recent losses, plunging its 7 percent ability to buy a company that is twice the size, raising doubts as to whether Shire shareholders will accept an offer 56 Percent in new Takeda shares.
The stock slide – 18 percent since news of a possible bid to buy – makes the cash-and-share deal less attractive to Shire shareholders, some of whom are reluctant or unable to hold Takeda shares.
"While this offer is a significant improvement over Takeda's third offer (38 percent cash), we still wonder if it will be enough to satisfy Shire shareholders," said Jefferies analyst David Steinberg.
Shire's shares rose only 1.5 percent to 39.90 pounds in early London trading, well below Takeda's 49-pound bid, indicating skepticism over the deal, as Takeda's declining share price hit $ 64 billion Value of the offer undermines.
It's now been four weeks since Takeda first showed that it is considering bidding, and the absence of any fixed interest from rivals means investors have little chance of an intruder emerging.
The latest development, first reported by Reuters, follows after London-listed Shire rejected four earlier Takeda deals.
The fifth offer is £ 49.01 per share, consisting of £ 27.26 per share in new Takeda shares and £ 21.75 per share in cash. This represents a premium of 4.3 percent over Takeda's fourth proposal on April 20 and a premium of 11.4 percent over the first approach on March 29.
Shire, a member of the British stock index FTSE 100, announced that its board has agreed to an extension of Wednesday's deadline until May 8, allowing Takeda to perform more due diligence and consolidate its bid. Shire added the deadline can be extended further if needed.
Every business is faced with resolving several issues, including Shire's due diligence on Takeda, said the Dublin-based company.
An agreement would significantly improve Takeda's position in gastrointestinal disorders, neuroscience and rare diseases, including a blockbuster hemophilia franchise.
If successful, this would be the largest overseas acquisition by a Japanese company and would lead Takeda, led by Frenchman Christophe Weber, into the top tier of global pharmaceutical companies.
Weber, who became Takeda's first non-Japanese CEO in 2015, has publicly stated that he is looking for takeovers to reduce his exposure to a mature Japanese pharmaceutical market.
The combined company is primarily listed in Tokyo and also offers American Depository Receipts – a move that gives Shire investors an easier way to cash out.
But the deal would be a huge financial burden, and Takeda investors were skeptical of the benefits of a Shire business given the size of the potential buy and fears that a large equity issue will be needed.
Moody & # 39; s said the deal would accumulate debt and hit Takeda's credit ratings. "This huge takeover has a leverage effect that could lead to a downgrade of multiple levels," said analyst Yukiko Asanuma.
Ambitious cost reductions are also considered necessary to make the business worthwhile, and the uncertainties facing an expanded group would mean a big change in Takeda's investment case.
"Takeda shares were valued for their stability and relatively high dividend," said Daiwa Securities analyst Kazuaki Hashiguchi, adding that this would be attractive even to investors without specialist knowledge of the drug sector.
Takeda, which now has a market value of $ 33 billion, had $ 466.5 billion in cash and short-term investments at the end of December. She said Wednesday she intends to maintain her dividend policy and investment grade credit after the deal.
Pharmaceutical dealmaking has risen sharply this year as major players seek to improve their pipelines. A Takeda-Shire transaction would be by far the largest.
Shire has long been seen as a likely takeover target.
Botox maker Allergan Plc ( AGN.N ) said last week that he was contemplating competing, only to scrap it hours later due to shareholder pushback. In addition, Shire was almost bought by the US pharmaceutical company AbbVie Inc. ( ABBV.N ) in 2014 until US tax regulations changed the deal.
Shire dates back to 1986 when he started out as a seller of calcium supplements to treat osteoporosis and operated from an office over a shop in Hampshire, southern England. Since then, it has grown rapidly through acquisitions, generating $ 15.2 billion in sales last year.
Over the past twelve months, however, it has been under pressure from broader generic and debt rivalry with the $ 32 billion Baxalta acquisition in 2016, a widely criticized deal.
It announced last week that it was selling its oncology business to unlisted French drug maker Servier for $ 2.4 billion.
Additional reporting by Ben Hirschler in London, Padraic Halpin in Dublin, Miyoung Kim in Singapore and Sam Nussey in Tokyo; Editing by Rosalba O'Brien, Edwina Gibbs and Mark Potter