Tokyo (AFP) – Shares in Tokyo-listed Takeda tumbled Wednesday after it ramped up its offer for Irish pharmaceutical company Shire to £46 billion ($64 billion), which would represent the largest ever foreign takeover by a Japanese firm.
The bid follows a string of offers rejected by Shire over the past month and comes as Takeda looks to expand abroad in the face of an expected drop in drugs prices at home.
Analysts said the buyout would be a smart move by Takeda as it looks to diversify and could pay off in the long-term.
However, the news sent Takeda shares plunging more than nine percent in Tokyo at one point Wednesday morning, with investors worried it would overextend the Japanese firm’s finances. In afternoon trade it was off 6.10 percent at 4,555 yen.
In a statement on Tuesday night, London-listed Shire said it was “willing to recommend the revised proposal to Shire shareholders subject to satisfactory resolution of the other terms of the possible offer”.
It set a new May 8 deadline for the conclusion of negotiations.
The offer is equivalent to £49 a share, Shire said, an represents a 60 percent premium to its closing price on March 27, before Takeda made its interest known.
Shire said that at completion of the deal, shareholders would own about 50 percent of the enlarged Takeda, while the new Takeda shares would be listed in Japan and the United States.
– ‘Long-term benefits’ –
Tuesday’s announcement from Shire comes after it rejected on Friday Takeda’s fourth offer in a month, worth £42.8 billion, saying it was too low.
Last week, Botox maker Allergan said it was considering making a counter-offer for Shire, raising the prospect of a bidding war, but then confirmed it would not make a bid.
The buyout is the latest in a flurry of merger and acquisition activity in the pharmaceutical industry as traditional players see profits eroded by competition from generic medicines.
Japanese drugmakers in particular are facing pressure in the domestic market as the government tries to cut prices of many branded medicines and increase focus on cheaper generics to rein in health spending as the population ages rapidly.
Takeda, led by Frenchman Christophe Weber, has been actively looking overseas for acquisitions.
In 2011 it took over Swiss rival Nycomed for 9.6 billion euros ($13.6 billion at the time).
Masayuki Kubota, chief strategist at Rakuten Securities, said the negative initial market reaction to the bid notwithstanding the takeover would likely be a good move for Takeda.
“I fully understand the first impression was negative,” he told AFP.
“It would be the biggest-ever takeover by a Japanese company and it’s natural for that to spawn worries” because a failed buyout could cause huge losses, he added.
But he said Shire offered an attractive portfolio.
“They have a lot of treatments for rare diseases, where the barriers to entry for other companies are very high. Their profitability is high.”
He said Takeda was right to take advantage of its “ample cash flow” and Japan’s low interest rates.
“It may look expensive short-term, but it will bring good benefits over the longer term.”
Fumiyoshi Sakai, an analyst at Credit Suisse, agreed.
“It would also enhance its global reach,” he told AFP, adding it would give Takeda access to “research and development in the field of digestive systems, mental illness and rare diseases where Takeda has wanted collaboration.”
— Bloomberg News contributed to this story —