There was a time when Shire would have considered the prospect of a £38-a-share takeover derisory. Unfortunately, for investors who have sat on the stock over the past year of value destruction, those days are long gone.
Takeda’s revelation today that it might buy the beleaguered UK group at long last offers Shire investors some hope. But it also gives them a tricky choice: should they sell out now given the chance, or should they hang on for a price that could help them recoup last year’s losses while risking the Takeda deal coming to nothing?
Just a year ago Shire shares were changing hands at over £45 each; yesterday they closed barely above £30. True, if a takeover were to happen it would involve a decent premium, but Shire investors must surely realise that, in the cold light of day, they might never again see £45 a share – equivalent to a £41bn ($58bn) market cap.
|Shakeda's top 10 products|
|Product||Main indication||Originator||2022e sales ($m)||Annual change|
|Gammagard Liquid||Immunoglobulin deficiency||Shire (Baxalta)||2,895||+7%|
|Vyvanse||Attention deficit disorder/hyperactivity||Shire||2,724||+5%|
|Advate||Haemophilia A||Shire (Baxalta)||1,310||-10%|
|Takecab||Gastro-oesophageal reflux disease||Takeda||828||+13%|
As news that Takeda was “considering making an approach to Shire regarding a possible offer for the company” broke this morning Shire traded up as high as £38.50. Many took that as enough of an opportunity to sell, sending the stock down later in the day.
The question must now be what price might be high enough to secure a recommended takeover? One prominent US sellside analyst, speaking to EP Vantage anonymously before today’s emergence of Takeda as a suitor, said: “I’d say if you offered most investors in [Shire] £37.50 they’d give it to you.”
Given today’s share movement the market clearly sees some hope for a better return than that. Perhaps some investors think that Takeda is more willing to overpay than most: after all, Japanese pharma has something of a track record when it comes to paying through the nose for a shot at making a name in the West.
Takeda itself has raised eyebrows, handing over a huge $5.2bn to buy Ariad a year ago, when later it emerged that there were apparently no rival interested parties for it to outbid.
And it is not clear why the Japanese group today went public with an approach that had not even proceeded to a formal bid. Unless there was reluctance on the part of Shire to enter into negotiations – unlikely, given the pressure under which the UK group is to act – the only thing Takeda achieves by going public is having to pay a premium over an even higher base valuation.
Don’t mention Baxalta
If the move develops into a formal approach and takeover it would represent Takeda’s boldest acquisition to date, and it is already clear that Shire’s main attraction is its presence in neuroscience, seen by some as old-fashioned but still reliable, and rare diseases, which presumably excludes Shire’s shrinking haemophilia business.
The attraction does not, judging by the areas Takeda outlined today, extend to Shire’s blood business, acquired through the disastrous 2016 takeover of Baxalta. That purchase cost Shire $32bn, which is uncomfortably close to where the entire UK company’s market cap stood yesterday.
Back in 2016, of course, Shire desperately needed to buy something that would give it a quick revenue boost and make it unpalatable to an opportunistic buyer like Allergan; Baxalta fitted the bill nicely. As things stand today the best that Takeda could do with the Baxalta business would be to sell it quickly to another struggling company with a presence in blood therapeutics – say, Sanofi.
A quick Baxalta flip would help reduce some of Takeda’s outlay for Shire, as well as satisfying deal bankers who would, presumably, no longer see the benefit of Shire’s neuroscience business being split out, as had been mooted last August.
Any still undecided Shire investors must now consider the possibility of an approach to rival Takeda. Earlier speculation had focused on “desperate” companies, in the words of one analyst, including Abbvie or even Sanofi itself.
Still, those shareholders who today took the money and ran can hardly be blamed. The choice for those who stay was made no easier when this afternoon Shire confirmed that it had “not received an approach from Takeda”.