By Kate Holton and Thomas Wilson
LONDON/TOKYO (Reuters) - Japan's largest drugmaker Takeda Pharmaceutical (T:4502) is considering a bid for London-listed Shire (L:SHP) that could top $40 billion and spark another takeover battle in the deal-hungry pharma industry.
Takeda said on Wednesday it was "at a preliminary and exploratory stage" of considering a bid, sending Shire's shares up as much as 26 percent. They were 17 percent higher at 1215 GMT, valuing the group at 32.7 billion pounds ($46.3 billion).
Shire sells treatments for rare diseases and attention deficit disorder. Takeda said buying it could create a global biopharmaceutical leader, boosting its position in the United States, oncology, gastrointestinal diseases and neuroscience.
The drugs industry has seen a surge in dealmaking as large players look for promising assets to improve their pipelines.
In recent months, Sanofi (PA:SASY) beat Novo Nordisk (CO:NOVOb) in the race for Belgian biotech company Ablynx (BR:ABLX), while U.S.-based Celgene (O:CELG) bagged cancer specialist Juno Therapeutics
The prospect of a bid for Shire, 57 percent of whose employees are based in North America, immediately stoked expectations for a takeover battle.
"Takeda publicly saying it is considering an approach for Shire inevitably means that other big pharma players including AbbVie, Novartis, Pfizer (NYSE:PFE) et al will equally be running the numbers with a very high likelihood of leading to a competitive M&A multi-bidder situation," said Michael Wegener, managing partner at hedge fund Case Equity Partners, which has a stake in Shire.
Takeda said it had not approached Shire's board. Under UK takeover rules, it has until April 25 to decide whether to make a bid.
Shire said it noted Takeda's statement, and confirmed it had not received an approach.
Shire has been under pressure in the last year, with its shares down 24 percent, due to greater competition from generic drugs and a debt pile that stems from its biggest ever deal, the $32 billion acquisition of Baxalta in 2016.
The company announced in January a plan to split into two separate businesses to boost performance.
FRENCH CEO
Takeda, Japan's largest drugmaker by sales, focuses its research on developing treatments for cancer and diseases of the digestive and nervous systems.
It has made no secret of its ambition to become a more global company through acquisitions, although buying Shire would be the boldest move yet by its French CEO Christophe Weber.
"Clearly defined strategic and financial objectives are core to Takeda's disciplined approach to acquisitions, including in relation to its dividend policy and credit rating, which are well-established," Takeda said in a statement.
"Any potential offer for Shire, if made, would have to align with this strict investment criteria."
The statement came after Takeda's shares had closed 1.9 percent lower on the Tokyo stock exchange.
"An acquisition would likely have to include a considerable quantum of equity," Deutsche Bank (DE:DBKGn) analysts said in a research note. "As such, it remains to be seen as to if/how a transaction could be structured or whether today's news will stimulate other potential acquirers in to action."
Weber, a former GSK executive, was appointed CEO in April 2015 and has already done a number of deals.
In January, Takeda agreed to buy Belgian biotech group TiGenix NV (BR:G9U) for 520 million euros, funding the deal with cash on hand, and last year, it bought U.S. cancer drug specialist Ariad for $5.2 billion. Takeda's overseas deals mirror those by other Japanese companies, which are facing bleak prospects at home as a rapidly shrinking population weighs on domestic demand.
($1 = 0.7061 pounds)