Takeda, Shire agree on $62 billion takeover deal

Analysts say the deal would be a smart move by Takeda as it looks to diversify but there are also concerns that it could be overextending itself financially

Takeda's recommended offer is the culmination of a drawn out takeover process which has seen Japan's largest pharma company make multiple bids for London Stock Exchange-listed Shire over recent months.

On Tuesday, Takeda pledged to quickly reduce the debt and maintain the company's investment grade credit reading.

To pay the cash fraction of the deal, Takeda told that it had acquired a loan facility of $31 billion with Sumitomo Mitsui Banking Corp., JP Morgan Chase Bank NA, and MUFG Bank Ltd., among others.

However, Shire stock prices have rocketed more than 30 percent since late March. Takeda's main areas of focus moving forward will be neuroscience, oncology, gastroenterology and vaccines. Takeda will add its roughly $33 billion market cap to Shire's, which is north of $49 billion.

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Takeda expects substantial cost synergies of at least $1.4 billion. Shire, on the other hand, earns about two-thirds of its product revenue from the US - a fact Takeda highlighted in its rationale for pursuing the biotech.

Under the terms of the deal, Shire shareholders will receive $30.33 in cash and either 0.839 new Takeda shares or 1.678 Takeda American depositary receipts for each Shire share. Shareholders in the United Kingdom group will hold about 50 percent in the enlarged drugmaker following completion of the deal, which is slated for the first half of next year.

However, Takeda's research and development hub will stay in Boston, she said.

Takeda will become the only pharma company with dual listings in Tokyo and NY.

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"Together, we will be a leader in providing targeted treatments in gastroenterology, neuroscience, oncology, rare diseases and plasma-derived therapies".

Analysts and business professors recently predicted that the takeover will nearly certainly result in layoffs of several hundred Shire employees over the next couple of years - mostly among administrative employees whose duties could be filled by workers for Osaka-based Takeda. The company was saddled with debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal, while generic drug makers have stepped up competition.

And the acquisition would catapult Takeda, which has few late-stage experimental drugs in its own pipeline, into the ranks of the world's biggest pharmaceutical companies.

The CEO of Takeda, Christophe Weber cites that jointly with the Shire, a stronger Takeda will emerge. Last year, the company expanded its footprint in the United States oncology market with the $4.7bn purchase of Ariad Pharmaceuticals.

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