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Takeda nears Shire deal with £46b offer

It would boost the Japanese drugmaker's earnings potential amid lack of new therapies

Tokyo

TAKEDA Pharmaceutical Co reached a preliminary agreement to buy Shire Plc with a sweetened takeover offer of about 46 billion pounds (S$85 billion), closing in on a takeover that would vault it into the ranks of the world's top pharma companies.

The UK-listed company's board said it was willing to recommend the latest offer to shareholders, and the companies got more time from regulators to complete a deal, Shire and Takeda said in separate statements.

Takeda slumped the most in almost five years, tumbling as much as 9.3 per cent in Tokyo trading.

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A Shire takeover would rank as Takeda's largest-ever transaction and land the Japanese drugmaker medicines for rare diseases such as hemophilia - a field that's luring a growing number of drugmakers because they can charge more for unique life-saving drugs than for routine treatments.

Takeda has ramped up its ambitions under CEO Christophe Weber, seeking growth overseas amid patent expirations and a shrinking domestic population. Shire rose 1.6 per cent at 8:22 am in London trading, valuing the company at 36 billion pounds.

The drugmaker's shareholders would own half of the enlarged company under the latest Takeda proposal. "The deal seems to be much more of a merger," Ronny Gal, an analyst with Sanford C Bernstein & Co in New York, wrote in a note to clients.

Takeda is offering the equivalent of 49 pounds a share, including 27.26 pounds in stock and 21.75 pounds in cash, the companies said.

That's a 60 per cent premium to Shire's closing price on March 27, before Takeda disclosed its takeover interest. Since then, Takeda has raised its offer in a series of increments.

The companies received an extension from UK regulators until May 8 for Takeda to make a firm offer. The takeover is likely to go through, according to Mr Gal.

Allergan Plc, another potential bidder, withdrew last week. "If there is another bidder for Shire, they will reasonably emerge in the next two weeks," Mr Gal said. "We think such bidder is unlikely, as we expect Shire bankers to have left no stone unturned."

A completed deal would be the biggest by a Japanese company of an overseas target, and create one of the world's largest pharmaceutical companies. With few late-stage experimental drugs in its own pipeline and a shrinking home market, Takeda needs lucrative new therapies.

The deal would boost Takeda's earnings potential and transform it into a global pharmaceutical powerhouse. But Japanese investors worry about the hefty debt and the possibility Shire shareholders would sell their new Takeda stock.

"The market is viewing this acquisition as negative," said Mitsushige Akino, an executive officer with Ichiyoshi Asset Management Co in Tokyo. "It is too big. Takeda might not be able to handle it." BLOOMBERG