Takeda announced that it has completed its $62-billion acquisition of Shire. Christophe Weber, chief executive of Takeda, stated “this marks a significant moment in [our] history and is an exciting step forward as we accelerate our transformation journey to deliver highly-innovative medicines to patients around the world with expanded scale and geographical footprint.”
Completion of the deal comes after shareholders of both companies approved the merger last month. The acquisition had been previously cleared by regulators in the US, EU, Japan and China.
“The execution of our integration begins today, and we are confident in our ability to execute a smooth integration,” said Mr. Weber, who noted that the acquisition was completed “several months earlier than expected.”
The transaction is expected to nearly double Takeda’s annual revenue to $31.3 billion, while the Japanese drugmaker plans to increase R&D spending to more than 400 billion yen ($3.7 billion) annually. Following a review of Shire’s finances, Takeda intends to disclose its earnings forecast for the 2019 fiscal year, as well as its long-term strategy in May.
Mr. Weber indicated that he wants to offload $10 billion worth of “non-core products” as part of efforts to reduce the nearly $31 billion in debt incurred as a result of the deal, leading to a recent downgrade of Takeda’s credit rating. Although Mr. Weber has not disclosed what assets will be offloaded, the executive stated earlier this week that the combined company is unlikely to divest its over-the-counter drug business.
In order to fund the acquisition, the Japanese drugmaker said it secured permanent financing with “an overall blended interest rate for Takeda’s total debt of approximately 2.3 percent.” The company added that it is “confident that it will retain its investment-grade credit rating and return to a net debt to [earnings before interest, tax, depreciation and amortisation] ratio of 2.0x or less within three to five years following completion.”
Commenting on the merger, Causeway Capital Management portfolio manager Alessandro Valentini remarked “it’s not going to be an easy integration, [and] that is why we encourage management to be razor-focused on delivery.” Mr. Valentini added “there are businesses at Takeda with little cash and earnings generation that they can dispose of to pay down the debt, such as some of the assets from previous acquisitions like Nycomed.”
Meanwhile, Shire noted that former CEO Flemming Ornskov will serve in an advisory capacity to Mr. Weber until March 31, while Shire’s former chief financial officer Thomas Dittrich will act as an advisor to his counterpart at Takeda until March 3. Shire directors Olivier Bohuon, Ian Clark, and Steven Gillis have also been appointed to Takeda’s board effective January 8.