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Business deals

Takeda chief says Shire takeover will bear fruit in first year

Weber foresees $1.4bn in annual cost savings

Takeda Pharmaceutical President Christophe Weber. (Photo by Noriyuki Takada)

TOKYO -- Takeda Pharmaceutical President Christophe Weber is confident that the $62 billion deal to acquire Shire, the Irish drugmaker with a much larger market value, will start to pay off from the first year.

"Existing shareholders might worry about the dilution because we are paying part of the acquisition ... by issuing shares," Weber told Nikkei on Tuesday following the announcement of the blockbuster agreement. "But even after issuing the new shares...the [earnings per share] will significantly grow at year one."

Takeda maintains that Shire will inject much-needed value to the 237-year-old company, enabling it to compete in the elite global echelon. When asked how the buyout will transform Takeda, Weber immediately touched on the substantial returns to be had on the earnings and the research and development fronts.

Takeda spends 300 billion yen a year on R&D, but that scale jumps to around 500 billion yen upon the addition of Shire. The integration of Shire's capabilities will create a stronger R&D structure, said Weber.

The new entity's R&D strategy will span six core treatment areas, said Weber. Along with Takeda's four competencies in vaccines, gastrointestinal and neurological diseases, and cancer, Shire will contribute its portfolio in rare diseases and blood ailments. The enlarged company will also rationalize current research and eliminate redundancies.

"There are huge unmet medical needs, and there are very interesting scientific innovations," like gene therapy, "which could generate very interesting treatments for our future," he said.

To finance part of the deal, Takeda will issue about 4 trillion yen ($36.6 billion) worth of new shares, a sum that exceeds the Japanese company's current market capitalization. With investors wary of the dilution risk, Takeda's share price has plunged more than 16% since March.

During the same period, Shire's shares gained 13%, giving it a market value of approximately $50 billion to Takeda's $34 billion.

The Japanese drugmaker is also borrowing around 3 trillion yen to fund the buyout. But Weber promises that the financial burden will not cut the dividend payout, which stands at 180 yen per share. Not only is Takeda committed to maintaining that amount, but is also intent on keeping the investment grade on its debt, said the chief executive.

Takeda took an interest in Shire early on, and began negotiations immediately after announcing in late March that it was considering an approach. Now that Shire's board has agreed to the buyout, the deal will move to the company's shareholders for approval.

Weber says the purchase could conclude as early as the first half of 2019. Clear synergies are likely to emerge within three years, "we are seeing $1.4 billion in cost synergies" a year, he said.

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