LONDON (Alliance News) - Moody's Investor Service said Wednesday it has downgraded Takeda Pharmaceutical Co to A2 from A1 and has placed its ratings on review for further downgrade following the company's announcement to acquire Irish drugmaker Shire PLC.
Shire recently agreed a takeover deal with Takeda, who is to pay USD30.33 in cash per Shire share, plus either 0.839 new Takeda shares or 1.678 Takeda American depository shares.
The deal is worth GBP49.01 based on Takeda's closing price on Tokyo on April 23, the last date before which Shire said it would be willing to recommend a deal. This puts the value of the offer at around GBP46.00 billion, though approximately GBP44.00 billion based on Takeda's closing price on Monday in Tokyo.
"Even without the Shire acquisition, we do not expect Takeda to maintain a financial profile consistent with its previous rating of A1," said Moody's analyst Yukiko Asanuma.
"At the same time, the rating is on review for further downgrade because, if Takeda acquires Shire as currently contemplated, its gross debt/earnings before interest, tax, depreciation and amortisation will almost double to about six times," adds Asanuma.
Moody's said Takeda's leverage was already above the three times gross debt/EBITDA level at its previous rating and, given the "thinness of its late-stage pipeline", Moody's expected Takeda would have continued to make acquisitions, making it unlikely that it "would have reduced leverage below three times on a sustainable basis even without the Shire acquisition".
Together with Shire's existing debt of around JPY2 trillion, Takeda's on-balance sheet debt will likely increase six-fold from JPY1 trillion now to JPY6 trillion, if all of the cash offered to Shire's shareholders of JPY3 trillion is funded by debt. Moody's also notes that Takeda plans to issue almost JPY4 trillion in equity.
Shares in Shire were down 1.0% Wednesday to 3,998.50 pence each.
