Weber became Takeda’s first non-Japanese CEO in 2015 and has been hunting for acquisitions to make the company more global and reduce its exposure to a mature Japanese pharmaceutical market.
Buying Shire is a big financial stretch for Takeda but Weber believes it will generate substantial cash flow, enabling the enlarged group to pay down its borrowings quickly.
Takeda said $30.1 billion in bridge loan financing would be replaced with a combination of long-term debt, hybrid capital and available cash ahead of completion, without providing a breakdown.
The Japanese company predicts annual cost synergies of at least $1.4 billion three years after completion and the deal is expected to boost underlying earnings significantly from the first full year after closing.
Jobs will go, with the group’s combined 52,000 workforce likely to be reduced by 6-7 percent. The companies have a number of commercial, research, and manufacturing overlaps, particularly in the United States, where both have a large presence in Boston.
Weber argued Takeda would be able to maintain its investment-grade credit rating with a target of achieving a net debt to EBITDA ratio of 2.0 times or less in the medium term.
Some analysts have suggested Takeda could sell off certain Shire businesses to make the deal more manageable but Weber said gastroenterology, neuroscience, oncology, rare diseases and blood products were all important areas to be retained.
There may, however, be opportunities to divest certain medicines falling outside these fields.
“There is 25 percent (of the portfolio) which is more isolated products. Some are doing very well, some less well. That’s where you could have some portfolio assessment and potentially some disposals,” Weber said.
Shire said last month it would be willing to recommend an offer from Takeda after it rejected four previous approaches.
The company traces its roots back to 1986, when it began as a seller of calcium supplements to treat osteoporosis, operating from an office above a shop in Hampshire, southern England. Since then, it has grown rapidly through acquisitions to generate revenues of about $15.2 billion last year.
But it has been under pressure in the past 12 months due to greater competition from generic drugs and debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal.
Takeda was advised by Evercore, J.P. Morgan, and Nomura, while Shire worked with Citi, Goldman Sachs, and Morgan Stanley.