Opponents to Takeda’s $62B buyout of Shire gain support but need much more

by Eric Palmer | 

Jun 11, 2018 

A small group of Takeda shareholders that opposes the company’s $62 billion buyout of Shire is gaining support for its effort to block the deal, which they say will shrink the value of Takeda shares.  

What started out as a dozen dissenters has grown to 130 in opposition. It includes former employees and members of the founding Takeda family, which hold 10% of the company’s shares, Reuters reported, citing unnamed sources.

That is still a long way from the 33% of shareholders that is needed to derail the deal by Japan’s largest drugmaker. The dissenters are hoping to gain support from retail customers in Japan, which hold about 25% of shares, a source tells Reuters. That is an unusually large percentage for any large public company. They also are soliciting foreign institutional investors, the source said.

The opposition group, which has pointed out that Takeda would have to take on significant debt to pay for the deal, wants the company to vote on the Shire buyout at the annual shareholder meeting. But the Takeda board intends to hold a separate meeting to decide the outcome. It has said the acquisition was made “after repetitive and careful discussion” by board members.

The Japanese pharma company has been selling the deal to shareholders as a way to create a global leader in gastroenterology and neuroscience, while simultaneously boosting the company’s presence in vaccines, rare diseases and oncology. It has said it expects to extract $1.4 billion in cost savings over the next three years by slashing the combined workforce by up to 7%, what amounts to 3,600 jobs. The cuts are expected to hit SG&A, R&D and manufacturing.

The opposing shareholders noted that Takeda intends to finance about 55% of the Shire takeover with newly issued shares. That “might significantly dilute the earnings per share, which is a dividend resource, and there is a danger of causing a great disadvantage to existing shareholders including institutional investors,” their proposal said. The shareholders also expressed concerns about the deal in light of Takeda’s “current financial situation.”

Takeda did not immediately respond to a request for comment. But the company acknowledged while announcing the deal a couple of weeks back that it will have to take on debt. That said, its executives guaranteed investors they would maintain a debt-to-EBITDA ratio of no more than 2x and said the company expects to maintain its investment-grade credit rating.

Takeda shareholders fear dilution, debt from Shire deal pose ‘high risks,’ demand shareholders vote on it

by Arlene Weintraub | 

May 29, 2018

Takeda’s long-sought $62 billion acquisition bid for Shire has launched the Japanese drugmaker into the big leagues, but it hasn’t quite been embraced by investors. The company’s shares have lost more than 20% of their value since late March, when Takeda was preparing its first of what ended up being five bids for Shire.

That loss of market value is being cited by a group of 12 shareholders stepping up to oppose the deal. They’re demanding that Takeda put the acquisition up for a vote at its shareholder meeting on June 28, and that its executives do more to address the “overly high risks” the deal poses to existing shareholders. The group voiced its concerns in a proposal that Takeda disclosed in the notice (PDF) of convocation for the shareholder meeting.

Takeda will be taking on plenty of challenges, to be sure. During the most recent quarter, Shire chalked up a few disappointments, including dry-eye treatment Xiidra and enzyme-replacement therapy Elaprase.

But Shire’s neuroscience unit performed well during the quarter, and the company’s decision to separate out that division's financials revealed that it is highly profitable. The neuroscience unit's performance helped the company turn in better-than-expected sales and earnings—and it prompted predictions from analysts of a successful merger between Takeda and Shire. “You have both committed buyer and an accepting seller. Short of Takeda’s stock price imploding a deal is likely,” said Bernstein analyst Ronny Gal in an investor video following Shire’s earnings announcement.