Friday 19 October 2018

Shire highlights value as it offloads oncology business

Flemming Ornskov CEO of Shire which is a target for Takeda. Photo: Bloomberg
Flemming Ornskov CEO of Shire which is a target for Takeda. Photo: Bloomberg

Ben Hirschler

Dublin-based Shire, a London-listed rare diseases specialist that is a potential takeover target for Japan's Takeda Pharmaceutical is selling its oncology business for $2.4bn (€1.9bn).

The sale to unlisted French drugmaker Servier suggests there is value locked up within Shire's portfolio - despite a dismal share price performance in the past two years - as its management braces for a possible $50bn bid battle with Japan's biggest drugmaker.

Shire is a global pharmceutical business, with its tax base in Ireland.

Shire said yesterday it would consider returning proceeds from the sale to shareholders through a buyback and that further selective disposals of non-strategic assets were possible.

The divestment of the cancer business may be a deterrent for Takeda, since oncology was one of the areas it had highlighted as driving the case for a Shire deal, along with gastrointestinal medicine and neuroscience.

Still, given the small contribution of the cancer business to Shire's overall profits, Deutsche Bank analysts said this was unlikely to be a deal-breaker.

A Takeda spokesman declined to comment.

Shire was at pains to point out that it started exploring the sale of oncology in December and commenced the disposal process in January, during which it identified multiple possible US, European and Japanese buyers. Takeda's interest in Shire was made public only at the end of last month.

Under UK takeover rules, Takeda has until April 25 to announce whether or not it will bid for Shire, which has a market value of around $47bn.

Buying Shire would be transformational for Takeda but would be a huge financial stretch, since the company is worth around $10bn more than the Japanese group. Shire also had debt of around $19bn as of the end of 2017.

The drugs industry has seen a surge in deal-making this year as large players look for promising assets to improve their pipelines, but a Takeda-Shire transaction would be by far the biggest yet.

Two sources with direct knowledge of the matter said last week that Takeda had sounded out its major creditors for loans to fund a potential Shire bid.

Shire CEO Flemming Ornskov said the sale of the oncology business to Servier demonstrated the value embedded in Shire as shares in the company rose 0.5pc in early trading. (Reuters)

Irish Independent

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