Shire (SHPG) Turns Down Takeda's Third Buyout Proposition

Shire plc (NASDAQ:SHPG) announced that it has rejected the Japanese company Takeda Pharmaceutical’s third offer to acquire it in a cash-stock deal for 46.50 pounds per share or around $63 billion. The offer comprised 17.75 pounds in cash and 28.75 pounds worth of new Takeda shares.

Notably, Shire had earlier rejected two low-priced offers from Takeda stating that the latter continues to undervalue its growth and pipeline prospects. However, per the companies, discussions between the Japanese entity and the Dublin, Ireland-based drug giant are still on.

Notably, on Thursday Apr 19, Botox maker Allergan (NYSE:AGN) announced that it is mulling over an offer to buy Shire. However, later in the day, it issued another press release informing that it abandons the plan to make an acquisition proposal for Shire.

We remind investors that the first proposition tendered by Takeda late last month, was priced at 44 pounds per share. Subsequently, Takeda put forward a second proposal of 45.50 pounds per share in the second week of this month, which saw a marginal increase from the first offer. However, both were turned down by Shire.

In order to recover from this refusal, Takeda needs to find a new means to purchase Shire, accompanied with much greater market valuation and the power to compete with the likes of Allergan among others.

Shares of Shire have gained 5.2% so far this year versus the industry’s decline of 1.7%.

We remind investors that on Monday Apr 16, Shire announced a definitive agreement to sell its oncology business to the French company Servier, for $2.4 billion.

Importantly, Shire has initiated the sale of this segment as part of its long-term strategy to focus on rare disease leadership. The company plans to return the proceeds from this divestment to its shareholders through a share buyback.

The company also looks to dispose other non-strategic assets as part of the strategy.

Demand for companies with rare disease drugs in their portfolio or pipeline candidates are rising. This is evident from the billion-dollar deals signed this year. Novartis (NYSE:NVS) is acquiring AveXis for $8.7 billion while Sanofi (NYSE:SNY) has spent nearly $16 billion to boost its rare blood disorder pipeline.

Zacks Rank

Shire carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

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