Takeda said early Wednesday that it is considering making an offer to buy Shire $SHPG, and it has a clearly thought out a set of reasons why.
As of now, Takeda said in a statement that it has made no formal offer for Shire, but is exploring the possibility. That’s exactly in line with takeover rules to satisfy UK regulators. And Shire’s shares immediately blasted upward, jumping 17%. The company started the day with a market cap of $38 billion.
For Takeda CEO Christophe Weber, a Shire acquisition would drive a big expansion in the Boston area, where the Japanese company has been concentrating much of its R&D operations. R&D chief Andy Plump is based in the Boston area, and Shire has been readying new facilities for itself in Cambridge, near its main international headquarters in Lexington, MA.
A buyout would also come after Takeda had shaken up its R&D structure globally, cutting back on staff while doing more deals with partners like Denali.
In a statement out this morning, Takeda spelled out why it’s prepping a bid. A deal, the company said, would:
- strengthen Takeda’s core therapeutic areas of oncology, GI and neuroscience
- accelerate Takeda’s vision to be a leader in specialized medicines that are transformative to patients through the addition of Shire’s leading global rare disease franchise
- further enhance Takeda’s robust R&D strategy, concentrating on key therapeutic areas
- reinforce a strong and large-molecule focused late-stage pipeline within Takeda’s core therapeutic areas to complement Takeda’s own pipeline and discovery capabilities
- balance Takeda’s geographic focus to align with the market opportunity in the US
- drive financial value from a strong combined financial profile
Shire is still in the midst of a complete makeover of its own engineered by CEO Flemming Ornskov, who has steered the company into the rare disease business while considering options for possibly spinning out its ADHD division. Ornskov lined up the $32 billion buyout of Baxalta, but analysts have been skeptical about Shire’s future in light of the big changes it faces as Roche rolls out Hemlibra, grabbing market share in the hemophilia market.
Shire has frequently been raised as a potential takeover target, and came close to merging into AbbVie four years ago. That deal fell through with the introduction of new rules making capital inversions difficult, preventing the tax benefits AbbVie sought in buying a company which is officially based in Ireland. But the company remained a frequently cited takeover target, most recently at the end of last year, with analysts wondering if Pfizer would make a move.
Now you can expect plenty of speculation to follow, as analysts wonder aloud whether Pfizer and other potential bidders will step up to make this an auction.
By the rule book, Takeda now has until 5 pm (London time) on April 25th to make a bid.
Not everyone would conclude that a buyout is a good idea.
“While it is impossible to say never on M&A, Shire does not strike us as an obvious takeover candidate,” said UBS at the time, according to a report from the Financial Times. “Shire’s specialty focus and mix of therapeutic foci means that most buyers would struggle to extract substantial operational synergies while escaping from competition problems, in our view. Shire is based in Ireland, which means a very low corporate tax rate, which would most probably rise in most scenarios were the company acquired. It would also be a bold acquisition in our view given the uncertain trajectory of Shire’s haemophilia business.”
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