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TAKEDA PHARMACEUTICAL COMPANY LIMITED

(4502)
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Takeda clears key hurdle as investors back $59 billion Shire deal

12/05/2018 | 10:37am EDT
FILE PHOTO: The logo of Takeda Pharmaceutical Co. is displayed at the company's news conference venue in Tokyo

OSAKA (Reuters) - Takeda Pharmaceutical has won shareholder approval for its $59 billion takeover of London-listed Shire, creating a global powerhouse that has a stronger drugs pipeline but is also saddled with massive debt.

Takeda will be joining the ranks of the world's top 10 drugmakers and gaining expertise in rare diseases through the deal, the biggest overseas acquisition by a Japanese company.

It will also become one of the most indebted. In addition to issuing new shares, the company has secured $30.9 billion in bank loans.

The company's high debt levels were a top concern for Takeda shareholders who gathered at an extraordinary meeting in Osaka, western Japan, although almost 90 percent of them voted to approve the deal as expected.

"I want to keep my Takeda shares into the future, but now I am worried about further declines in the share price," said Satoshi Ito, a 75-year-old shareholder. He abstained from voting.

Separate meetings of Shire shareholders later on Wednesday also secured overwhelming support for the transaction.

Takeda shares have fallen around 25 percent since the drugmaker revealed its interest in the acquisition in March. They closed up 1 percent at 4,240 yen on Wednesday.

Shire shares gained 3.2 percent to 46.95 pounds on relief Takeda's board had won its nine-month battle to persuade shareholders of the merits of the tie-up.

The acquisition is expected to close on Jan. 8. It now only requires sanctioning at a court hearing expected to be held on Jan. 3.

DEBTS, DESCENDANTS AND DIVESTITURES

A small group of Takeda investors, including descendants of the company's founder, had actively opposed the deal.

"We are definitely against this because the financial risks are too great and the expected benefits are quite limited," said Kazuhisa Takeda, a former director of the drugmaker and a member of the founding family, ahead of the meeting.

"I think M&A is quite necessary for Takeda's future but Shire is not the answer."

Chief Executive Christophe Weber has promised to turn the deal profitable by slashing costs. It predicts annual savings of at least $1.4 billion three years after completion, and expects to boost underlying earnings significantly from the first full year after closing.

Takeda also has a plan to sell up to $10 billion worth of non-core assets to pay back debt. Andy Plump, Takeda's global head of R&D, told Reuters that accelerated deleveraging was needed to keep its credit rating at a safe level.

"We have a plan for divestiture that gets us to a place in three to five years that our credit agencies are OK with. Our credit rating is likely to tick down a notch, but still above junk bond status, which is critical for us," he said in an interview.

Analysts have said it may be difficult to integrate the two companies. Toshiba's acquisition of Westinghouse over a decade ago and Japan Post Holdings' $4.9 billion bet on Toll Holdings are widely seen as examples of many Japanese companies having paid high valuations in cross-border deals only to face massive write-downs later.

But they also said Takeda has little choice but to seek growth abroad, with industry pressure to gain access to cutting-edge treatments amid declining revenue from older drugs that must compete with cheaper generics.

Even with the acquisition of Shire, some said Takeda will need to bolster its lineup of experimental therapies to compete in the longer term.

Shire's haemophilia business, for example, is already starting to face strong pressure from a competing drug being marketed by Roche as well as new gene therapies now in development.

"It's crucial whether the drugmaker can reinvest profits from the deal into seeds for developing future drugs," said Kazuaki Hashiguchi, a senior drugs analyst at Daiwa Securities.

"The benefits of the deal will last for a limited time, as no treatments can avoid patent expiration."

(Reporting by Takashi Umekawa, with additional reporting by Julie Steenhuysen in Chicago and Ben Hirschler in London; Editing by Muralikumar Anantharaman/Mark Potter/Susan Fenton)

By Takashi Umekawa


ę Reuters 2018
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JAPAN POST HOLDINGS CO., LTD. -0.92% 926.6 End-of-day quote.15.42%
JUST GROUP PLC -0.35% 98.45 Delayed Quote.41.34%
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LOOK HOLDINGS INCORPORATED -2.23% 1360 End-of-day quote.42.11%
ROCHE HOLDING AG 0.27% 354.95 Delayed Quote.14.56%
SEEK LIMITED -1.00% 29.65 End-of-day quote.3.93%
TAKEDA PHARMACEUTICAL COMPANY LIMITED -0.88% 3620 End-of-day quote.-3.60%
THE GLOBAL LTD. -0.95% 209 End-of-day quote.-19.62%
TOSHIBA CORPORATION 0.53% 4750 End-of-day quote.64.64%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.09% 109.625 Delayed Quote.5.62%
WILL GROUP, INC. -1.96% 952 End-of-day quote.-5.37%
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Financials
Sales 2022 3 363 B 30 654 M 30 654 M
Net income 2022 299 B 2 722 M 2 722 M
Net Debt 2022 3 113 B 28 377 M 28 377 M
P/E ratio 2022 19,0x
Yield 2022 4,97%
Capitalization 5 681 B 51 849 M 51 784 M
EV / Sales 2022 2,62x
EV / Sales 2023 2,50x
Nbr of Employees 47 099
Free-Float 99,3%
Chart TAKEDA PHARMACEUTICAL COMPANY LIMITED
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Takeda Pharmaceutical Company Limited Technical Analysis Chart | 4502 | JP3463000004 | MarketScreener
Technical analysis trends TAKEDA PHARMACEUTICAL COMPANY LIMITED
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 15
Last Close Price 3 620,00 JPY
Average target price 4 891,33 JPY
Spread / Average Target 35,1%
EPS Revisions
Managers and Directors
Christophe Weber President, CEO & Representative Director
Constantine Saroukos Chief Financial Officer & Director
Andrew S. Plump Director, Research & Development President
Michael E. Mendelsohn Chief Medical & Scientific Officer
Mwana Lugogo Chief Ethics & Compliance Officer
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