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Business Deals

Goldman and Nomura lead all-star team behind Takeda-Shire deal

US and Japanese M&A advisers poised for $180m payday

Goldman Sachs advised Shire as it negotiated a takeover bid from Takeda, while the Japanese drugmaker enlisted Nomura.   © Reuters

TOKYO -- Six leading investment banks guided the $62 billion takeover agreement between Takeda Pharmaceutical and Irish drugmaker Shire, handing a coup to Japanese and U.S. financial advisers.

Advising Takeda during its month-long courtship of Shire was Nomura Holdings, Japan's largest brokerage group. Nomura, which developed a long-term relationship with Takeda as its lead underwriter, fashioned a cash-and-stock proposal that eventually won over Shire's board.

Nomura earned the title of Japan's top M&A adviser for 2017. But the Shire buyout alone is on par with the 6.7 trillion yen ($61 billion) value of Nomura-advised deals in all of the fiscal year ended March 31.

Takeda also enlisted the aid of Wall Street bank JPMorgan Chase, which provided support on pulling together foreign-currency funding. Also on the advising team is New York-based boutique advisory firm Evercore Partners, particularly French-born banker Francois Maisonrouge. His lengthy resume in brokering pharma deals, including for Shire, won the confidence of Takeda CEO Christophe Weber, also a Frenchman.

The buyout negotiations took place in Lexington, Massachusetts, the headquarters of Shire's extensive American operations, as well as in Ireland, London and elsewhere, accompanied by frequent international calls with advisers. 

Shire hired Wall Street players Goldman Sachs, Citigroup and Morgan Stanley as its advisers, with Goldman in the lead. The six advisers could collect fees totaling upwards of $180 million. 

Takeda also tapped three legal advisers, including London-based Linklaters. Shire's four legal advisers include Slaughter and May, another British firm.  

Irish drugmaker Allergan contemplated a bid for Shire last month, but walked away within hours after the announcement sent its share price tumbling. Bank of America Merrill Lynch acted as Allergan's adviser, but missed out on the Takeda-Shire deal. European investment banks, such as UBS and Deutsche Bank, were left out of the picture entirely.

Japanese pharmaceutical companies have mostly watched from the sidelines as global peers pursued scale through enormous mergers and acquisitions that have reshaped the industry. Takeda, which bought out U.S. oncology firm Ariad Pharmaceuticals for more than $5 billion just last year, is one of the few exceptions.

Yet despite its string of purchases over the years, the biggest Japanese drugmaker by sales generates only half the profit of domestic rival Astellas Pharma. So Takeda is staking its future on Shire, spending much more than its market value to finance the deal.

The industry has seen its share of competing offers for acquisition targets. But having six Japanese and U.S. investment banks advising on the Takeda-Shire deal means other interested companies would have trouble assembling a rival bid quickly.

M&A advisers are not the only parties that stand to benefit from Takeda's acquisition. Investment banks are competing to underwrite the stock and bond issues that will finance the deal past a roughly $31 billion bridge loan.

Contingency fees, paid upon completion of the Shire acquisition, reportedly make up a large proportion of advisers' total compensation. This attests to the difficulty of seeing the deal through. Investors wary of the financial burden have shunned Takeda, shaving more than 30% off the stock price from its year-to-date high in mid-January. Whether existing Takeda shareholders will support the Shire purchase remains unclear. In an interview with Nikkei, Weber assured investors that the acquisition will boost earnings per share despite concerns about dilution.

But one investment bank executive sees this moment as test for corporate Japan, which rarely uses share swaps for megadeals. "If [the acquisition] succeeds, it will open up a path to big M&A deals involving Japanese corporations, which will accelerate growth," this person said.

Additional reporting by Nikkei staff writers in Tokyo

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