Takeda CEO Christophe Weber has finally closed his $62 billion deal to buy out Shire. Now comes an even harder part.
The two companies announced the pact overnight, with Shire’s board accepting Weber’s offer of £49 a share, which values the company at £46 billion. Now he’ll have to sell it to shareholders — which is not a given after Takeda saw its market cap plunge more than 20% during the talks.
If he gets past that hurdle Weber will then need to knit together a new top 10 — by sales — global pharma company while carving out $1.4 billion in cost synergies. About $600 million will come out of two R&D organizations that have already been through several cycles of restructuring. Slightly more than half will come from sales and administration.
That means job cuts.
Drill down into the fine print of the deal, and you’ll find that the top execs at Takeda will ax 6% to 7% of the combined workforce. About a third of that will come out of R&D, with the bulk of the cuts being made to sales and administration. With about 30,000 staffers at Takeda and 22,000 at Shire, a 7% cut would cost the jobs of about 3,640 people.
The new Takeda that emerges will be based in Tokyo with expanded operations in the Cambridge/Boston area, which will contain the bulk of its R&D group. The Japanese company says it will then start a review of facilities, to see which Shire labs and offices will stay and which will go. Manufacturing ops will also be integrated.
The new company will be left with regional groups in Japan, Singapore, Switzerland and the US. But Shire’s official headquarters in Dublin, which will no longer be needed, may well face the ax.
The merger of these two companies, with the smaller Takeda capturing the larger prey, gives Weber the global transformation he was asked to deliver. But it also has raised serious questions about the longterm viability of the Shire organization he’s buying, which has an aging franchise in ADHD and a major new threat to its hemophilia operations from Roche’s Hemlibra.
Under CEO Flemming Ornskov, Shire bought out Baxalta for $32 billion, and has been combining its drugs into a pipeline heavily focused on rare diseases, giving Takeda what it likes to call a complementary organization to its own concentration on oncology, gastroenterology and central nervous system therapeutic areas plus vaccines.
Takeda also set aside $9.1 million for retention bonuses to keep the services of some key personnel, which will double the pay and bonuses due to CEO Ornskov and CFO Thomas Dittrich.
JP Morgan Chase Bank, Sumitomo Mitsui Banking Corporation and MUFG Bank have put together a $31 billion bridge loan to complete the cash portion of the deal, which will later be restructured into a longterm loan as Takeda tries to convince the credit rating groups to show some mercy on its ratings.
Image: Christophe Weber. GETTY IMAGES
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