Shire surges on buy-out interest
Shares of Shire rocketed after Japanese rival Takeda Pharmaceutical said it was considering a buy-out of the company.
FTSE 100
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FTSE 350
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FTSE All-Share
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Pharmaceuticals & Biotechnology
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Shire Plc
4,690.00p
16:39 08/01/19
Takeda Chemical Industries(Sapporo)
n/a
n/a
One City-based analyst said Shire might fetch a price of 4,100p a share, although he was not sure that "anything" would come out of this.
The same analyst said the bid had come "out of the blue", although in his view the firm led by Flemming Ornskov had been a perennial bid target.
Takeda said the approach was at a "preliminary and exploratory stage" and that Shire's board has not been approached, adding that a bid was not certain.
Indeed, Shire later issued a statement saying it had received no approach from Takeda and that there was no certainty on whether a bid would be forthcoming or on the terms which it might contain.
Under Takeover Panel rules, the Japanese outfit had until 1700 BST on 25 April to clarify its intentions.
Market commentary initially highlighted how such a transaction would make a good fit with the Asian company's stated aim of expanding into more niche treatments, such as oncology, gastrointestinal disorders, and neuroscience.
In 2017, Takeda bought US biotech firm Ariad Pharmaceuticals for $4.7bn with management having expressed in further expanding its footprint in the States.
Nevertheless, analysts were also quick to point out the roughly similar sizes of the two companies, meaning that any transaction would either be a merger or share deal or Takeda would need to leverge its balance sheet substantially, which might entail raising its net debt to a level of 5.0 times EBITDA.
For their part, as recently at 19 March analysts at Morgan Stanley had said they "struggled" to justify any significant downside from then current levels in absolute terms, explaining that the stock remained "undervalued" and "underappreciated" for its strong delivery.
Indeed, even after Monday's surge the shares were still lower for the year.
Morgan Stanley's target price on the shares at the time was 4700p, having been lowered from 5,700p that same day, following a series of setbacks and in the face of challenges such as gaining market access for its dry eye treatment Xiidra.
As of 1206 BST, stock in Lexington, Massachussetts-based Shire was higher by 15.34% to 3,590p, having hit an intra-day high of 3,879.5p, taking its market capitalisation to £32.248bn.
RBC Capital Markets said the news was merely "an incremental positive" for SHPG shares, with Shire having "time and time again been reported as a takeout target".
RBC made the point that based on current London prices and based on Takeda's previous purchases it was an unusually large acquistion for the Japanese company. "A more likely scenario, in our view, would be Takeda acquiring a portion of Shire's broader portfolio."