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UPDATE 1-Takeda shareholders give nod for $59 bln Shire acquisition

Wed, 05th Dec 2018 04:06

* Deal is the biggest overseas acquisition by Japanese firm

* Some had opposed massive debt required for acquisition

* CEO Weber has promised to slash costs

* Shares in Shire and Takeda both gain following vote(Adds latest shares, timing for completion of deal)

By Takashi Umekawa

OSAKA, Dec 5 (Reuters) - Takeda Pharmaceuticalshareholders approved on Wednesday its $59 billion takeover ofLondon-listed Shire, creating a global powerhouse with astronger drugs pipeline but one that is saddled with massivedebt.

Takeda will be joining the ranks of the world's top 10drugmakers and gaining expertise in rare diseases through thedeal, the biggest overseas acquisition by a Japanese company.

It will also become one of the most indebted. In addition toissuing new shares, the company has secured $30.9 billion inbank loans.

The company's high debt levels were a top concern forshareholders who gathered at an extraordinary meeting in Osaka,western Japan, although almost 90 percent of them voted toapprove the deal as expected.

"I want to keep my Takeda shares into the future, but now Iam worried about further declines in the share price," saidSatoshi Ito, a 75-year-old shareholder. He abstained fromvoting.

Takeda shares have fallen around 25 percent since thedrugmaker revealed its interest in the acquisition in March.They closed up 1 percent at 4,240 yen on Wednesday.

Shire shares gained 2.6 percent to 46.69 pounds on reliefTakeda's board had won its nine-month battle to persuadeshareholders of the merits of the tie-up.

The acquisition is expected to close on Jan. 8. It remainssubject to Shire shareholder approval at meetings due later onWednesday and sanctioning at a court hearing expected to be heldon Jan. 3.

DEBTS, DESCENDANTS AND DIVESTITURES

A small group of Takeda investors, including descendants ofthe company's founder, had actively opposed the deal.

"We are definitely against this because the financial risksare too great and the expected benefits are quite limited," saidKazuhisa Takeda, a former director of the drugmaker and a memberof the founding family, ahead of the meeting.

"I think M&A is quite necessary for Takeda's future butShire is not the answer."

Chief Executive Christophe Weber has promised to turn thedeal profitable by slashing costs. It predictsannual savings of at least $1.4 billion three years aftercompletion, and expects to boost underlying earningssignificantly from the first full year after closing.

Takeda also has a plan to sell up to $10 billion worth ofnon-core assets to pay back debt. Andy Plump, Takeda’s globalhead of R&D, told Reuters that accelerated deleveraging wasneeded to keep its credit rating at a safe level.

"We have a plan for divestiture that gets us to a place inthree to five years that our credit agencies are OK with. Ourcredit rating is likely to tick down a notch, but still abovejunk bond status, which is critical for us," he said in aninterview.

Analysts have said it may be difficult to integrate the twocompanies. Toshiba's acquisition of Westinghouse over adecade ago and Japan Post Holdings' $4.9 billion bet onToll Holdings are widely seen as examples of many Japanesecompanies having paid high valuations in cross-border deals onlyto face massive write-downs later.

But they also said Takeda has little choice but to seekgrowth abroad, with industry pressure to gain access tocutting-edge treatments amid declining revenue from older drugsthat must compete with cheaper generics.

Even with the acquisition of Shire, some said Takeda willneed to bolster its lineup of experimental therapies to competein the longer term.

Shire's haemophilia business, for example, is alreadystarting to face strong pressure from a competing drug beingmarketed by Roche as well as new gene therapies now indevelopment.

"It's crucial whether the drugmaker can reinvest profitsfrom the deal into seeds for developing future drugs," saidKazuaki Hashiguchi, a senior drugs analyst at Daiwa Securities.

"The benefits of the deal will last for a limited time, asno treatments can avoid patent expiration."(Reporting by Takashi Umekawa, with additional reporting byJulie Steenhuysen in Chicago and Ben Hirschler in London;Editing by Ritsuko Ando, Muralikumar Anantharaman and MarkPotter)

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