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Takeda shareholders approve Shire acquisition

Japanese drugmaker's move garners strong support despite debt risks

Takeda's acquisition of Shire will place it among the world's top 10 drugmakers by revenue.   © Getty Images

TOKYO -- Takeda Pharmaceutical's planned $58.3 billion acquisition of Irish drugmaker Shire passed the final major hurdle on Wednesday as shareholders approved issuing new stock to finance more than half of the purchase.

The deal will lift the Japanese drugmaker into the top 10 globally by revenue as it combats fierce competition.

Takeda announced that at least 88% of shareholders voted in favor of the proposal, well above the two-thirds needed for approval. The institutional investors that represent around 66% of the company's shares generally supported the deal.

The company said the same day that it plans to complete the transaction on Jan. 8.

The acquisition has already won approval from antitrust authorities in major markets such as Japan, the U.S., the European Union and China. Shire is to hold a shareholders meeting on Wednesday at 8:30 p.m. Japan time.

Takeda President Christophe Weber stressed that the deal will increase the company's presence in the U.S., the biggest drug market in the world, and where innovative medicines are often approved first. He said the combined group's sales there would account for 48% of total revenue.

Scale, Weber said, is crucial for the group's future.

The company leads Japanese drugmakers with revenue of 1.77 trillion yen ($16 billion) but ranks about 20th worldwide. Global leaders such as Roche, Pfizer and Novartis generate around $50 billion each. Takeda hopes to break into that tier through the Shire acquisition.

Takeda, known for its expertise in oncology, gastroenterology and neuroscience, is looking to expand its product range by absorbing Shire's skill in treatments for rare ailments such as immune disease and hemophilia. The Irish company was established in 1986 and has grown by making more than 20 acquisitions, including biopharmaceutical player Baxalta, purchased for about $30 billion in 2016.

Shire pulls in about $15 billion in revenue, and racks up net income of roughly $4 billion. So it is a high-profit company, though like Takeda it is facing stiffer competition.

Takeda will complete the acquisition as early as January. Opponents of the deal cited the hefty debt that the Japanese drugmaker would accrue along with the dilution of per-share profits. Kunio Takeda, a former chairman and a member of the company's founding family, said "the Shire deal's risk is high."

A shareholder in his 80s said he had "concerns" about the deal. "But it's already started," the man said. "I will vote in favor."

Another investor in his 70s said he supported the acquisition. "I understand both opinions from the company and the founding family. But the domestic market is shrinking, so it is good to pursue opportunities in foreign markets."

Takeda will allot about $35 billion in new stock, which exceeds the company's current market valuation of around $30 billion. The rest of the purchase will be paid for by cash.

The drugmaker said on Monday that it entered a loan agreement with Japan Bank for International Cooperation for an aggregate principal of up to $3.7 billion. Takeda decided on an issuance of bonds worth around $14 billion in November as well.

The acquisition is expected to inflate Takeda's net interest-bearing debt beyond 5 trillion yen, including roughly 3 trillion yen in new debt and 1.5 trillion yen taken on from Shire.

The deal also would lift Takeda's goodwill to roughly 4 trillion yen, raising the risk of future impairment.

The Japanese company's stock price had fallen by over 20% since March when the acquisition plan was revealed. The market's immediate reaction to the acquisition approval was mixed: The stock closed up 1% on the day on Wednesday, at 4,240 yen. But earlier, soon after the midday vote, it had touched a year-to-date low.

Weber said the stock's recent performance was regrettable, but said he was confident shareholders would understand the value of the deal. The president emphasized that the company would maintain its 180 yen dividend.

But the purchase will not quell competition in the industry.

The odds of success in developing a new drug are tiny. The difficulty for one company to devise a blockbuster treatment on its own means that global peers compete not only in their own research and development but also in making big acquisitions to find the seeds of new drugs. Takeda rivals such as Sanofi, Novartis and Celgene all announced acquisitions worth around $10 billion this year.

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