According to the news report by CNN Money, Shire Plc’s shares have surged as much as 12% this week as two rival pharmaceutical companies have shown interest in acquiring the biotech company.
Japan’s Takeda Pharmaceutical Co. had offered to buy Shire Plc for £42.4 billion ($60 billion) or $65.50 per share. This would be one of the biggest ever corporate takeovers by a Japanese company, according to Reuters. If the deal is eventually successful, it could take the company, led by Christophe Weber, to the highest ranks of global drug makers.
However, the rare disease drug maker rejected the offer stating that it was undervaluing the company as well as Shire’s growth prospects and rare drug pipeline. In fact, Shire released a statement that it had already received and rejected three different offers from Takeda in the last one month. The Irish company, however, did say that they were willing to evaluated internal as well as external chances to maximize the company’s value for its shareholders. This, they said, included any other bid that Takeda might make.
The drama intensified when, on Thursday, Allergan Plc announced that it was interested in making an offer for Shire. The drug maker’s shares surged after this announcement.
However, hours later, the CEO of Allergan Brent Saunders announced that they had decided not to pursue the acquisition of Shire. According to internal sources who did not wish to be named, the company received pushback from some of the shareholders who felt that the pharma company may be overstretching its resources. Allergan, based out of Dublin, has a market capitalization of $52 billion, but a debt burden of $30 billion as of December 2017, which is stopping the company from being able to make big acquisitions.
Now, Takeda is the sole bidder for the rare disease drug maker. However, investors are concerned about Takeda’s ability to push through with this acquisition. Shire has a market capitalization of £34 billion ($48.3 billion), while Takeda’s market value is about ¥4.1 trillion ($31 billion). Considering that Shire has a greater market value than Takeda, investors are concerned about the financial stretch it would be for the Japanese company and whether it would be wise for it to take on such debt.
According to Naoki Fujiwara, Shinkin Asset Management Co.’s chief fund manager, the scale of this is a little large. However, at this stage, Takeda has very limited ways to expand, and so may have to find other ways to expand.
On the plus side, Takeda would get a huge boost in its position in the rare diseases market. The company would acquire Shire’s super-successful hemophilia, gastrointestinal disorders and neuroscience franchise. Shire is also a market leader in treating hyperactivity.
The latest bid by Takeda was £46.50, made on April 12. The break-up of the bid was £17.75 in cash – to be paid in USD, and the other £28.75 in new Takeda shares. According to the UK’s takeover laws, Takeda has until April 25 to make a firm offer for the Irish company. There are also unconfirmed rumors that Takeda has sweetened its bid for Shire with a fourth offer that is priced at £47 per share, however, nothing is confirmed.
Shire has lost more than one third of its share price – 35% – in the last one year – before the Takeda/Allergan offers – due to stronger competition from the generic drugs segment. The company is also carrying a debt burden after its $32 billion buyout of Baxalta in 2016. Investors are also concerned that the hemophilia business Shire acquired from Baxalta would lose to a new therapy developed by Roche Holding AG.