A statement today by Japanese pharma peer Takeda Pharmaceutical that it was in the preliminary stages of considering a bid for Shire, has sent the London-listed company’s share price rocketing up by over 18%. Well into afternoon trading today the Shire share price was above 3600p having started the day at 3181.5p. A morning high saw the share price reach 3825p.
Takeda’s statement, which was made after the close of the earlier Asian trading session this morning, was to the effect that a takeover bid was being considered as part of the company’s strategy to develop in “a truly global, value-based Japanese biopharmaceutical leader”.
The Takeda statement was also careful to emphasise that exploration of a deal was ‘at a preliminary and exploratory stage’, no approach has yet been made to Shire’s board and if it were there is no guarantee agreement would be struck. However, the fact that the Japanese company have made a public statement and the level of reaction by Shire’s share price can only be interpreted as meaning Takeda is confident and so is the market.
However, it does have to be noted that the Takeda announcement came after pressure was applied by the UK Takeover Panel following intense speculation this week saw extreme volatility in Shire’s share price. Speculation that Shire would imminently be the subject of a takeover bid has persisted for months.
Shire is a rare diseases specialist but also strengths in oncology, gastroenterology and neuroscience that would significantly improve Takeda’s own market position in these areas. Today’s announcement obliges Takeda to formally announce a takeover bid will be made, or it has dropped its interest and will not be proceeding with one, by April 25th.
Despite its share price dropping by around 20% over the past year, before today, Shire is in a relatively strong position. Since current chief executive Flemming Ornskov took over five years ago, Shire’s market capitalisation has grown from £18 billion to around £33 billion. February also saw Shire post forecast beating 2017 revenues of $15.2 billion. Optimism was, however, tempered by a warning that 2018 could see profits dip as generic competition on several of Shire’s drugs increased.
With a market cap of around $41 billion, Takeda is not actually a bigger company than Shire. It has been very aggressive in its acquisition trail in recent years but the company’s largest takeover to date has been that of Swiss drugs company Nycomed for $13.7 billion back in 2011. This led UBS co-head of pharmaceutical research Jack Scannell to speculate that any potential offer would be presumed to include a high percentage of equity. How this might be received by Shire’s board and shareholders is uncertain and an alternative outcome could be a ‘merger of equals’ rather than a buyout.