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Shire recommends Takeda’s offer

After six weeks of courtship the Japanese company has finally got its target’s management on board
May 9, 2018

Shire’s (SHP) board has finally agreed to Takeda’s (JP:4502) takeover, after six weeks and five separate bids. Under the terms of the offer, current Shire shareholders will receive $30.33 (£22.34) and either 0.839 new Takeda shares or 1.678 Takeda American Depository Shares. With a total value of £46bn, the offer is a comfortable premium to the closing market capitalisation on the day prior to Takeda’s first proposal.

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But the shareholders could yet be the undoing of this deal. Three-quarters of Shire’s investors and two-thirds of Takeda’s must vote in favour, and judging by recent share price movements, neither are on board. Takeda’s share price has fallen 18 per cent since management first made its move on its UK-listed peer as investors worry that the deal – which would be the largest Japanese acquisition of a foreign company in history – is too risky.

At Shire, its shares are currently trading substantially below the £49.01 total offer price, suggesting shareholders aren’t comfortable with accepting the equity portion, which would give them 50 per cent ownership of a Japanese-listed company. One-off costs related to the transaction are forecast at $2.4bn, while net debt for the enlarged group is expected to be around 4.8 times adjusted cash profits.