Hedge funds bet big on Shire deal ahead of Takeda investor vote
Two hedge funds have bet over £1bn that Takeda Pharmaceuticals will club through its acquisition of Shire at a shareholder meeting On Wednesday.
US billionaire Seth Klarman’s Baupost took a 1.12 per cent stake in Shire earlier this month, hoping that the company’s stocks will rise after the deal is approved.
Alongside its holdings in Shire, valued at £467m, Baupost has also taken out a £111m short position in Takeda – betting that the bidder will fall.
The move means that the hedge fund now has over half a billion pounds of skin in the game as investors prepare to vote on the deal in the next few days.
Klarman is betting that Shire’s share price, currently 4,550p, will increase in value, level with Takeda’s 4,900p a share bid.
Meanwhile, the investor believes that Takeda will fall further.
The Japanese company has already lost 35 per cent of its market value since the beginning of the year, as investors questioned the wisdom of acquiring Shire, the larger of the two companies.
Echoing Baupost’s predictions, hedge fund Paulson also took nearly 1.8m short shares in Takeda, valued at £51m, and a £436m stake in Shire.
After months of toing and froing over what would be the biggest ever international acquisition for a Japanese company, Takeda management got backing from two shareholder advisory firms on 20 November, the same day Klarman took its stake in the companies.
Institutional Shareholder Services (ISS) and Glass Lewis both recommended Takeda’s investors vote for the deal at Wednesday’s meeting.
The pharmaceutical company, which needs to drum up support from two thirds of its shareholders, has faced resistance from descendants of Takeda’s founders, retail investors and former employees.
“The deal diversifies the company in terms of products and geographies, and provides strong cash flow generation that, combined with divestments, allows for relatively rapid deleveraging, despite maintaining top of the range leverage in the mid-term,” ISS told its clients.