Shire board willing to recommend £46bn Takeda deal

Shire directors said on Wednesday they would be willing to recommend the latest takeover proposal from Takeda Pharmaceutical that was pitched at roughly £49 per share, subject to certain terms.

The UK Takeover Panel has given Takeda a new 'put up or shut up' deadline of 1700 BST on 8 May to conclude talks.

Following receipt of a fifth proposal from Takeda on Tuesday, Shire's board announced just past midnight that the new potential offer comprised $30.33 (£21.75) in cash and 0.839 new shares in the Japanese drugmaker, which were lately valued at ¥4,923 so equating to £27.26 at recent exchange rates.

This fifth proposal values Shire at roughly £46bn and would also see Shire shareholders entitled to receive any dividends announced, declared, made or paid by Shire prior to completion.

At the end of last week, Takeda made a fourth approach pitched at £47 per share, comprising £21 in cash and £26 of new Takeda shares, valuing Shire at £44bn.

Shire directors have told Takeda that they "would be willing" to recommend the newer proposal to their shareholders subject to the agreement of "certain other terms", completion of a confirmatory due diligence by Takeda, the unanimous and unconditional recommendation of Shire's board and final approval by Takeda's board.

Takeda confirmed the statement, adding that it reserves the right to alter the mix of the proposal and reminded that it could still refrain from making any firm offer.

If the transaction were completed, Shire shareholders would own roughly 50% of Takeda, with newly issued shares listed in Japan and the US through the ADR program.

Shire shares, which late last month fell below £40 having topped £50 just over a year ago, edged up 2.5% to 4,026.25p in early trading on Wednesday.

Analysts at RBC Capital Markets noted that the fourth proposal's £21-per-share cash had appeared to be nearing the maximum amount that Takeda would bid, given Shire's likely preference for a cash deal and Takeda fast approaching its 5.0x net leverage limit.

The latest proposal would let the Japanese company remain at or near this net leverage limit, while allowing existing Takeda shareholders to maintain at least 50% ownership of the new company.

Michael Hewson at CMC Markets noted that Takeda shares have nosedived in Tokyo, down 30% since the beginning of the year, with 17% of that decline coming in the wake of Takeda’s interest in Shire becoming public, at the end of March.

"Given how low interest rates are in Japan right now raising the necessary funds for this Shire acquisition shouldn’t be too difficult, however just because you can raise the money doesn’t mean you should," he said, pointing to net debt that will stand well above the $100bn level.

"At the moment this remains a preliminary offer however shareholders in Shire are likely to be a little concerned about getting a 50% stake in a company which has seen its share price nosedive in the last few months and which could well be worth considerably less by the time any deal is concluded."