Japan’s Takeda Pharmaceuticals clinched the $62 billion acquisition of Shire (SHPG) early Tuesday after a six-week tussle between the two companies in which Allergan (AGN) also was briefly interested in a possible merger.
If approved, it will be the largest overseas purchase by a Japanese company, according to Dealogic. Dealogic says that with debt, the deal is worth $81.5 billion. Takeda will add its roughly $33 billion market cap to Shire’s, which is north of $49 billion. The new Takeda will be close in size to Bristol-Myers Squibb (BMY) and Eli Lilly (LLY).
RBC analyst Douglas Miehm said the deal alleviates some concerns, notably that the Japanese drugmaker could de-lever sufficiently and that its dividend will remain intact. The firm expects to general annual pretax cost synergies of $1.4 billion by the end of the third year.
“We do anticipate the deal spread to remain wider than normal given the complexity of the transaction requiring approval in various geographies, ability to realize synergies, especially R&D (research and development) and long-dated closing date,” he said in a note to clients.
Acquisition Of Shire
The total deal is consistent with Takeda’s fifth proposal and values Dublin-based Shire at 49.01 pounds, or about $66.21, per share. All together, Takeda will pay 46 billion pounds, or roughly $62.1 billion. The companies expect the deal to close in the first half of 2019.
Under the terms of the deal, Shire shareholders will receive $30.33 in cash and either 0.839 new Takeda shares or 1.678 Takeda American depositary receipts for each Shire share. When the deal wraps, Shire shareholders will own 50% of the new Takeda.
Takeda’s new shares will also trade on the Tokyo Stock Exchange and the New York Stock Exchange.
RBC’s Miehm noted that the acquisition is expected to be significantly accretive to earnings from the first full fiscal year following the close. It’s also expected to provide a return on interest above Takeda’s cost of capital over the same time period.
Takeda confirmed that it still needs approval from two-thirds of its existing shareholders. But it is confident it can get those votes, Miehm said. To pay for the acquisition, Takeda entered into a bridge credit agreement — a type of loan — for $30.85 billion.
Miehm kept his outperform rating on Shire stock. On the stock market today, Shire rose 1.5% to close at 163.73. That, and first-quarter outperformance from Valeant Pharmaceuticals (VRX), didn’t help drug stocks more broadly, though, which dipped 0.3%.
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