What's going on?
News broke on Thursday that Irish biotech firm Shire had rejected a $60 billion takeover bid from Japan’s Takeda Pharmaceutical – but discussions are still continuing as rumors of a counter-offer from the Men of the West (a.k.a. US pharma giant Allergan) sparking a battle for “the Shire” were cast into the abyss.
What does this mean?
Takeda is trying to expand its largely Japan-focused business beyond its home market, with Shire the latest in a series of foreign pharma companies that it’s looked to acquire. While a deal with Shire would catapult the Japanese firm into the US market, it would also be pretty expensive, necessitating lots of borrowing on Takeda’s part.
On Thursday afternoon, it appeared that Allergan was also weighing a bid for the Irish firm – though it later decided against it. Still, Shire believes Takeda’s initial offer undervalues the company’s growth prospects and the value of its drugs currently in development.
Why should I care?
The bigger picture: Economic conditions in Japan are prompting overseas dealmaking.
Foreign acquisitions by Japanese companies have got a lot more common in recent years, as low interest rates and a shrinking population back home have encouraged Japanese businesses to seek higher returns elsewhere. Japan’s SoftBank, for example, has become a familiar name in the Finimize pages as it slurps up stakes in various tech companies around the globe.
For markets: The dust is yet to settle – and so is Shire’s share price.
Shire’s stock price has performed pretty dismally over the past year or so, a potential reason for Shire recently selling its cancer drugs business. The hinted-at cash windfall may have placated investors – and, according to some, may also have paved the way for them to begin negotiations over a Japanese takeover of the business. Now, with a higher offer from Takeda a strong possibility, those shareholders may, like Bilbo, end up making a tidy little packet from their adventures…