Ahead of the Takeda-Shire Takeover, Takeda Selling Chinese Joint Venture
By Mark Terry
Takeda announced that it is divesting its majority stake in a Chinese joint venture for about $280 million. It holds a 51.34 percent stake in Guangdong Techpool Bio-Pharma, which it is selling to venture partner Shanghai Pharmaceutical Holding and an investment fund. The deal is expected to be all in cash.
The joint venture was launched in 1993. Its purpose was to develop biopharma products derived from proteins found in urine. In 2010, Switzerland-based Nycomed acquired a majority stake. Takeda inherited that when it acquired Nycomed in 2011 for approximately $14 billion.
Nikkei Asian Review writes, “Takeda’s interest-bearing debts tallied around 985.7 billion yen ($8.87 billion) at the end of March, marking a roughly 70 percent increase over five years. Its $62 billion deal to buy out Shire is expected to cause the debt to balloon to 3 trillion yen. Takeda is also borrowing about 3 trillion yen to finance the purchase. Those factors are expected to heavily weigh on Takeda’s financial standing.”
In late March, Takeda expressed an interest in acquiring Shire. Due to news leaks, Takeda was forced into making its interest official due to UK laws. Shortly after it was announced,Allergan participated in talks to acquire Shire, but those collapsed within a matter of hours. On April 20, Takeda raised the bid.
During that period, Shire sold its oncology business to France’s Servier for $2.4 billion. The sale was unrelated to the Takeda acquisition bid and had been ongoing since the beginning of the year.
Overall, Takeda appeared to make five public bids for Shire. Under the terms of the deal, Takeda will buy Shire for $62.2 billion, or about $66.22 per share made up of $30.33 per share in cash and 0.839 shares of Takeda stock.
However, the $62.2 billion figure does not include Shire’s debt. By including that debt, according to Dealogic, the acquisition is closer to $80 billion.
CNN noted in May when the final deal was announced, “The price tag has alarmed investors in Takeda: Its shares are down 18 percent since it first revealed it was considering an approach for Shire in late March. The Japanese company has a market value of just $33 billion, stoking fears about how much debt it will have to take on to fund the acquisition.”
It’s doubtful that selling of the joint venture for $280 million is going to make much of a dent in an $80 billion acquisition, or assuage investors’ concerns. As the deal moves toward a 2019 close, analysts and investors are expecting to see Takeda make spinouts and sales to trim its financials.
Shanghai Pharma chairman Zhou Jun said in a statement, “This acquisition marks a strategic milestone for Shanghai Pharma in developing into a branded pharmaceutical manufacturer, and in building a first-class, domestic marketing organization. We believe via acquisitions such as this, and our overall strategy, Shanghai Pharma has an important role to play in the China government’s ‘Healthy China’ policy.”