Takeda CEO gets his Shire megamerger, thanks to shareholder nod. Can he make it pay off?

December 6, 2018

Behold, Takeda can soon call itself a Big Pharma. Its shareholders joined Shire’s in separately approving the mega-M&A deal, despite opposition from a small group of dissidents that include prominent members of the Takeda founding family.

Takeda said at least 88% of votes came in favor of the deal at a Wednesday shareholders meeting, well above the two-thirds needed. This allows Takeda to issue new shares to finance about half of the deal, now valued at around $58 billion. That’s down from $62 billion when it was first announced, thanks to Takeda’s declining stock price.

Separately on Wednesday, Shire shareholders backed the deal with almost 100% of votes in favor. Because antitrust regulators in the U.S., China, Japan and EU have all granted their blessings, and with no obvious roadblocks ahead, Takeda now expects to close the deal Jan. 8, 2019.

The approval marks a landmark win for CEO Christophe Weber, who has repeatedly argued for taking Takeda beyond the shrinking Japanese market. Determined to set Takeda on that expansion track, Weber’s management increased their offer four times before finally winning support from Shire’s board in May.

The deal, the largest outbound buy for a Japanese business, will “create a more competitive, agile, highly profitable, and therefore more resilient company,” Weber said in a statement Wednesday.

Some obvious pros of the acquisition include an immediate expansion for Takeda in the U.S. and EU, new expertise in rare diseases—where drugs often come with high sticker prices—and a deep pipeline of new drugs.

While multiple myeloma therapy Ninlaro and inflammatory bowel disease blockbuster Entyvio have helped Takeda these days, a lack of forthcoming products to sustain long-term growth had raised red flags among analysts. That’s why many voiced support for snapping up the growing U.K. company.

A small group of Takeda shareholders, however, including descendants of the Takeda founding family, openly objected to the deal.

Former Takeda chairman and the last member of the founding family to have run the Japanese pharma, Kunio Takeda, recently said he opposed the buyout, citing high risks. Some of his concerns have also been reflected in Takeda’s sliding stock price; shares have fallen more 20% since the first bid was unveiled in March.

In addition to issuing new shares to fund the deal, Takeda took out a $30.85 billion bridge loan to cover the cash part of the deal. That level of debt is a huge risk in itself. Opponents also pointed to potential competition to Shire’s big products, including a threat to its hemophilia franchise in the form of Roche’s fast-growing Hemlibra. That franchise makes up about 20% of Shire’s revenue.

To pay off the debt, Weber is aiming for $1.4 billion in savings within three years and plans to cut about 7% of the combined workforce, or around 3,600 employees.

Selloffs are also on the table, after reports emerged in September saying the company was looking to gather around $5 billion from divesting such Shire drugs as Xiidra. Takeda CFO Costa Saroukos told Nikkei a few days ago that the total “noncore assets” selloff could reach $10 billion.

Weber, a French-born executive, will need to execute the integration carefully, what with the recent dethronement of Carlos Ghosn as chairman of Nissan Motor and Mitsubishi Motors amid allegations that he conspired to incorrectly report his compensation for years. Ghosn drew his own criticism for pushing a wider globalization at Nissan and initiating large layoff rounds as it salvaged the near-bankrupt Japanese automaker. And Takeda’s anti-Shire investors will likely pay close attention to Weber’s every move from now on.

By Angus Liu

Source: Fierce Pharma