Shares of Shire surged a bit on Thursday as investors absorbed a series of analysts reports underscoring Takeda CEO Christophe Weber’s intent of pursuing a Shire takeover.
In a closed call with analysts — ensuring no reporters would be listening in — Weber insisted that Takeda could complete a takeout, raising its debt load but without hurting its dividend payments or investment grade rating. And he has some support among the analysts he’s wooing.
“We think the deal is likely because there is a willing buyer, willing sellers and room to meet both sides’ expectations,” noted Bernstein’s Ronny Gal.
One of the chief reasons why the analysts are giving this a real shot is that Shire has painted itself into a corner, with a big debt load in the wake of the Baxalta buyout as rivals carve away at big franchises and a big patent loss for Vyvanse waits in the wings. Shire CEO Flemming Ornskov has faced a rising level of muttering among the ranks of investors unhappy over their suffering share price with no expectation that he can turn things around quickly on his own.
For Takeda — which saw its shares suffer on the day that it voiced its interest in a buyout — a deal could also be transformative, boosting it fully into the ranks of the top global biopharma players and shedding its rep as a uniquely Japanese company. Takeda already has substantial R&D operations in the Boston/Cambridge area, where they would be adding the legacy groups from Shire and Baxalta. How many of those jobs would survive a takeover, though, is open to question.
Can Takeda make the numbers work? Here are Bernstein’s thoughts.
Based on our survey (Shire) investors want £42/$175 to start negotiation and £45/$190 to close the deal. They also want <50% in Takeda shares. We think Takeda can get close to it, with seeming willingness to go to 5x leverage, and issuing shares locally to reduce the shares issued to Shire shareholders. We believe the local market will be willing to absorb more Takeda stock given the positive local headlines and limited share movement down since the deal has been announced (-5%).
As of now, there is no bid on the table. Conforming to UK takeover rules, Takeda voiced its interest and has until 5 pm (London time) on April 25th to make an offer, or walk away. As of today, the betting is leaning toward a takeover move.
Christophe Weber, Takeda CEO.
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