Shares in pharmaceuticals giant Shire have soared as much as 25 per cent this morning after Japan's Takeda said it was considering a possible offer.
Japan's largest pharmaceuticals company said it was "at a preliminary and exploratory stage and no approach has been made to the board of Shire".
At the time of writing, Shire's share price was up 16.06 per cent at 3,563p.
Takeda said any deal with Shire would create a global biopharmaceutical leader and strengthen the company's presence in the treatment of rare diseases and the oncology, gastrointestinal and neuroscience sectors. A deal would also help the firm expand its business into the US.
Shire confirmed it had not received an approach from Takeda and noted that there could be no certainty a firm offer would be made.
The Ireland-headquartered company also makes Adderall to treat ADHD. It has previously said it could break the company into two listed firms, dividing its rare diseases and hyperactivity medicines businesses.
Shire not the obvious choice
Jack Scannell, co-head of pharmaceutical research at UBS, said Shire is not an obvious takeover candidate.
"There is presumably a price at which the financial engineering would work. However, Shire's specialty focus and mix of therapeutic foci means that most buyers would struggle to extract substantial operational synergies while escaping from competition problems, in our view.
"Also Shire's low corporate tax rate could rise in most scenarios were the company acquired. It would also be a bold acquisition in our view given the uncertain trajectory of Shire's haemophilia business. A merger of equals in this context might be more feasible," Scannell said.
Shire's share price has been held back by investors' concerns over the role of the board, but an approach from Takeda could be the event that triggers pressure on the company's management and brings back market confidence, Scannell said.
Takeda now has until 25 April to announce a firm intention or walk away.
More deals to come
So far in 2018, the healthcare sector has unveiled deals worth $138.7bn (£98bn), up 93 per cent from the same period in 2017, according to Thomson Reuters data.
Andrew Huntley, senior managing director at BDA Partners, which specialises in Asian mergers and acquisitions (M&A), expects to see more deals like the possible Takeda-Shire offer.
"In the pharmaceutical space there is a clear desire among Japanese groups to evolve from primarily domestic or regional players to a global scale, to access more innovative drug pipelines and to catch up in the growing area of biologic and large molecule drugs," Huntley said.
Ketan Patel at EdenTree Investment Management added that any deal from Takeda would be a "watershed moment" for Japanese pharma.
"There hasn’t been a cross border transaction in the sector, excluding joint ventures and small generic M&A. Takeda’s cash laden balance sheet appears a good fit for Shire’s struggling balance sheet, following recent large scale M&A," Patel said.
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