M&A shouldn’t be this easy. London-listed drugmaker Shire Plc has nudged Japan’s Takeda Pharmaceutical Co. to up its takeover proposal twice to 44 billion pounds ($62.5 billion). Now U. S. suitor Allergan Plc is in talks, too. This auction may have a bit further to go.
M&A shouldn’t be this easy. London-listed drugmaker Shire Plc has nudged Japan’s Takeda Pharmaceutical Co. to up its takeover proposal twice to 44 billion pounds ($62.5 billion). Now U. S. suitor Allergan Plc is in talks, too. This auction may have a bit further to go.
Takeda must have thought it was dangling a knockout price for Shire. While the target rejected the 46.50 pounds-a-share proposal, it has at least opened talks. Not surprising given the price mooted is 51 percent higher than where Shire’s shares stood before the would-be purchaser popped up.
The problem for Takeda is that it would need to fund much of any deal in stock. Its pitch comprises 16 billion pounds in cash and the rest in its own shares, which are listed in Tokyo and the U. S. Even so, the combined entity’s leverage would exceed four times forecast Ebitda. There may be scope to Takeda to put more cash in — but not much.
A takeover of a U. K.-quoted company using so much Japanese stock is unprecedented. To some shareholders outside Asia, the prospect of holding Tokyo-listed stock is going to be a problem. How big isn’t clear. A rival bidder from the U. S. or Europe could therefore have an advantage if it offered the same price, partly paid in its own stock.
Allergan could certainly use a deal: Its Restasis treatment for dry eyes faces looming generic competition. An offer with the same cash-share mix as Takeda’s would also push net leverage to similar levels.
It’s far from certain others will join the auction.
