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Business Deals

Band of Takeda shareholders opposes Shire takeover

Strong concerns over dilution and massive debt

Takeda investors against plans to buy Shire will voice their objections at the Japanese company's general shareholders meeting in June.

TOKYO -- A group of stockholders in Takeda Pharmaceutical will resist its plans to acquire Ireland-based Shire, prompted by such fears as a massive debt load and dilution of their rights.

The roughly 130 individuals include former Takeda workers and are believed to hold about 1% of voting rights together. Their proposal is expected to be listed in an invitation the Japanese drugmaker will issue for its annual shareholders meeting scheduled for June 28 in Osaka.

These investors cite Takeda's borrowing of more than 3 trillion yen for the deal -- up to $30.85 billion, the company has announced -- an expected decline in earnings per share, and a dilution of voting rights as among the reasons for their objection.

The drugmaker predicts that earnings before interest, taxes, depreciation and amortization will roughly triple and has indicated that it will maintain its annual dividend payout of 180 yen per share. But Takeda says it cannot give estimates for goodwill and EPS after the purchase, because the time frame is more than a year down the road.

Pharma Asset Research estimates that the total of goodwill and other intangible assets will exceed 5 trillion yen through the acquisition. It believes that annual costs will reach 350 billion yen when including such factors as interest on the more than 3 trillion yen in lending and amortization of goodwill.

The post-acquisition Takeda may log a net profit of around 100 billion yen should 350 billion yen in costs be subtracted from net profit projections for fiscal 2018 -- 321.3 billion yen for Shire and 139 billion yen for Takeda. And should the issuance of new stock cause the number of outstanding Takeda shares to double to 1.6 billion, Takeda's EPS will likely plunge.

The dissenting shareholders plan to ask management about these financial risks associated with the deal. They also intend to bring up such issues as the possibility of Shire's main offerings becoming less profitable as competing products enter the market.

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