Shire Share Discussion Threads

[romeike] 08/5/2018 14:07

Improved Takeda share price and a stronger USD vs weak GBP could add a nice bonus effect on top of the deals paper value.

Would be worth holding the dollar demoninated stocks into the inevitable clean brexit related collapse of sterling.

[nigelpm] 08/5/2018 13:54

In the meantime another bid could come along - hard to see why buying here is much of a risk really.

[demo trader] 08/5/2018 13:29

Will take nearly 7-9 Months to complete = Uncertainty AND Will track Takeda

[toffeeman] 08/5/2018 13:01

A 10% guaranteed return within a year is rather good methinks

[redtom1] 08/5/2018 12:58

EssentialInvestor, Thanks for your kind words.
It is certainly coming good but not quite past tense as yet.
Have decided to wait until completion to get max value out of it. It seems that the gap could be quite big for a while so no point in doing anything. Even if it moved up to £44/45 I would wait to completion as where would I find an almost guaranteed 10% return (assuming the offer was worth £49/50 at that point).
But still got 9 months to wait.
Not home and dry as yet but today was the biggest hurdle by far. Both Boards have agreed it, so next hurdle done already. Next the shareholders but can't see Shire turning it down until Takeda tanks. Takeda shareholders appear to have given it their blessing by the increase overnight so assuming the share price holds up, they should vote it through.
We will all have ti live with exchange rate differences but these are not going to stop the deal.
Not really any regulatory or country issues so no pressure from there. Today is a good day even if the share price only rose a few percent. But today is the start of the end. Phew!


I will now be going to the Rugby World Cup in Japan as my first big trip once money is in the bank!

[nigelpm] 08/5/2018 12:15

If you'd said to me yesterday there'd be an agreed bid, on the table, no extension and all in order but the share price would be £39.70 I'd have called you mental ;-)

[montyhedge] 08/5/2018 11:39

My only doubt big funds may not want Japanese paper.

[nigelpm] 08/5/2018 11:33

Seems I'm not alone - FT Alphaville snippet from OliveTree:

This looks a very clean transaction. Terms have been confirmed consistent with the previously announced terms. It has been confirmed that Takeda vote will be required, that will necessitate a 2/3 majority of votes cast. This vote will dominate the way the spread trades here, but one should take a degree of comfort from cultural factors, a $1.2bn break fee, the highly accretive nature of the $1.4bn synergies, the high degree of shareholder overlap and the absence of dissenting shareholders have had to voice their opinion, either by selling or by going public, in the extended period they have had. The timing guidance has dominated the questions we have had this morning, but we can see from the ADS timeline and the fact that a vote cannot occur until after the listing documents are available, that H1 2019 guidance is entirely reasonable. We would argue that early 2019 is the most likely timing, but it is perhaps understandable that the parties are being conservative here given the length of time that other large global transactions have taken recently. The spread continues to trade at a wide level of a UK 2.7 with little anti-trust risk. Obviously the Takeda vote and sheer size of the transaction is driving that level, but nothing in the Takeda register or commentary to date would justify this level of risk pricing.

[nigelpm] 08/5/2018 10:51

Yes, also could in part be that Takeda decided to keep their offer as it was previously - i.e. no further dilution to existing Takeda shareholders.

[essentialinvestor] 08/5/2018 10:50

Tom, many congratulations, came good for you in the end.

[redtom1] 08/5/2018 10:18

Nigel, I also picked up on that point. My biggest fear has been the impact to the Takeda share price and possible shareholder rejection.

Having read that bit of the article I can see it makes sense. And interestingly, the news of the offer leaked hence the rise in Shire ADR last night. Takeda even had to issue a press release about the speculation. But given that the leak was out there during Japanese trading, I was amazed that the Takeda share price went up on this news. Perhaps this is further evidence that the dissenting Japanese investors have mostly bailed out and the current shareholders are much more supportive of this deal. If this is true then we may have seen the worse of the Takeda share price fall. Perhaps it may slowly recover to 5000+Yen. I hope so.
A 5000Yen share price would value the deal (based on current exchange rates) at 5095p.

[nigelpm] 08/5/2018 09:54

This is a really good point from that FT article :


“It seems likely that most of the existing shareholders who do not favour this deal have already sold their holdings. In that sense, there is sufficient possibility that the vote will be approved,” Mr Hashiguchi said.

Anyone buying at £40 as a new investor will clearly vote "Yes" so may see natural increase that way in both share price and likelihood of deal.

[nigelpm] 08/5/2018 09:40

The only thing I can think of which may be a stumbling block, 75% of Shire shareholders have to approve, the big boys who owe the majority do they want Takeda shares.
Any thoughts chaps.

Yes indeed and Takeda Shareholders - two lots of shareholders to convince.

[redtom1] 08/5/2018 09:40

Shire, the rare diseases specialist, has unanimously recommended its shareholders accept a takeover offer from Japanese group Takeda that values the company at about £46bn and adds to a wave of M&A activity in the pharma industry.

The Dublin-based company has spent two weeks conducting due diligence on the offer of just over £49 a share, after rejecting four previous offers from Takeda due to concerns not only about the price but also the high proportion of stock compared to cash.

The offer now being recommended represents a 59.6 per cent premium to Shire’s closing price of £30.70 on March 27, before the Japanese group revealed its interest in the company.

Takeda is offering $30.33 (£22.35) in cash and 0.839 Takeda shares for each Shire share, which would lead to Shire shareholders owning approximately 50 per cent of the combined group.

Shire shares opened up 4.9 per cent at £40.40 after the news on Tuesday morning.

Susan Kilsby, chairman of Shire, said: “We firmly believe that this combination recognises the strong growth potential of our leading products and innovative pipeline and is in the best interests of our shareholders, our patients and the communities we serve.”

Under UK takeover rules, Takeda had to make a statement on its intentions towards Shire no later than Tuesday. It said the deal would strengthen Takeda’s core therapeutic areas, “bringing together complementary positions in gastroenterology and neuroscience, and provide leading positions in rare diseases and plasma-derived therapies”.

Takeda chief executive Christophe Weber said he expected the tie-up to deliver cost savings of at least $1.4bn, which may include a 6 to 7 per cent cut in the combined 52,000 workforce.

Including the value of Shire’s debt, the deal is worth £59bn ($80bn) according to data from Dealogic, and would be the largest foreign acquisition by a Japanese company.

However, there are questions about whether the deal will be consummated.

Takeda’s shares have already fallen nearly 18 per cent since it revealed its interest in Shire. Some analysts believe another bidder could yet emerge and potentially buy Shire for a lower sum, provided the cash component was higher, given that some Shire investors are concerned about holding significant amounts of Takeda paper.

Another potential risk to the deal is that Takeda could fail to secure a green light from its shareholders.

In order to issue new shares to acquire Shire, Takeda needs to secure a two-thirds approval from shareholders holding one-third or more of the voting rights.

Investor sentiment towards the deal has also been chilled by the fact Takeda would have to take on debt equal to nearly five times its earnings before interest, tax, depreciation and amortisation.

But Takeda said on Tuesday that the substantial cash flow generation expected from the deal would enable the combined group “to de-lever quickly following completion”. Mr Weber said the company aimed to reduce debt to 2 times ebitda in three to five years, protecting its investment grade credit rating.

Analysts say the key to winning shareholder approval depends on whether Mr Weber can convince sceptical investors that the risk of taking on more debt can be offset by Shire’s lucrative rare diseases portfolio — Shire has annual operating profits of $6bn versus Takeda’s $2bn.

Kazuaki Hashiguchi, analyst at Daiwa Securities, said Takeda’s shareholders may have shifted from being passive traditional investors attracted to the Japanese group’s stable dividends and earnings to a more risk-tolerant group during the one-month sell-off since late March.

“It seems likely that most of the existing shareholders who do not favour this deal have already sold their holdings. In that sense, there is sufficient possibility that the vote will be approved,” Mr Hashiguchi said.

Delays from regulatory and competition bodies remain a possible obstacle, but analysts believe the chance of difficulties are relatively slight since there are few overlaps between the companies’ drug portfolios.

[montyhedge] 08/5/2018 09:37

The only thing I can think of which may be a stumbling block, 75% of Shire shareholders have to approve, the big boys who owe the majority do they want Takeda shares.Any thoughts chaps.

[nigelpm] 08/5/2018 09:32

Indeed Tom - my response this morning was to buy some more!

However, I'm willing to accept there *could* be a reason for the huge discount and the big players will know more as they will be in a position to stop the deal happening.

[redtom1] 08/5/2018 09:24

Nigel, I agree with you.
A normal bid like this would have closer to 5% discount.
This could take up to a year so you need discount that as you say.
I guess the currency risks and Takeda share price adds another 5%+.
Does the shareholder approvals warrant another 10% discount? Really? Based on Takeda rising overnight (which surprised me if offer was know during trading), the risk here lowers.
As everyone has said, this discount seems far too heavy given we have just overcome the biggest hurdle. Frustrating.
No cruise booked just yet.

[montyhedge] 08/5/2018 09:24

Don't worry profit takers nearly done, these are going higher.

[cockneytrader] 08/5/2018 09:22

2019! This will be like bloody drip, drip water torture. Now do I have the boredom threshold to hold out?

[nigelpm] 08/5/2018 09:15

Even with the currency movements, time value of money and other uncertainties I'd have still expected a c.10% discount - 20% is gob smacking IMHO and suggests there's more to this than meets the eye.

[ny boy] 08/5/2018 09:08

Why is their a rush just let the share price do the talking it will go up over the coming weeks/months.

Right off driving around the Sardinian coastline, will check back in a few days.

[billytkid2] 08/5/2018 09:05

Very disappointing. Given we were trading £38-39 without a firm bid I would have expected £42+, particularly with the larger cash percentage. No way am I selling, will hold on for a year if necessary. However, I would exit if we saw £45 in the coming months.

[redtom1] 08/5/2018 09:03

Currency movements are going to play a big part in price movements over the next 9 months until completion. Offer currently at 4880p only 21p short of original value. But the current value is down 162p because of Takeda share price fall but up 141p because of currency gains.
There will be even more volatility ahead once you chuck in Takeda share price movements. Wow, this is complicated. No wonder it will take 9 months to complete.

[montyhedge] 08/5/2018 08:57

Banter aside, does seem excessive 20% discount.