By Noemie Bisserbe 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 21, 2018).

Japan's Takeda Pharmaceutical Co. said it has sweetened its proposal to buy rival drugmaker Shire PLC after its three previous bids were rejected.

The latest overture to Dublin-based Shire -- which as drawn takeover interest across the sector -- represents a premium of more than 50% to its value before reports of Takeda's interest first surfaced last month.

The Japanese company said on Friday that it proposed GBP47 a share for Shire, valuing it at GBP42.83 billion ($60.3 billion). That is marginally higher than the GBP46.50 that Takeda said it offered the day before. But at GBP21 a share in cash and GBP26 a share in equity, the latest proposal includes a higher portion of cash.

Shire on Friday said its board "is considering its position with respect to the fourth proposal and will issue a further announcement in due course." The company had said the previous offer undervalued the business.

Friday's announcement, which Takeda said doesn't constitute a firm offer, came after a frenzy of interest in Shire on Thursday. Allergan PLC disclosed it too was considering making an offer, though after its shares fell sharply, the Dublin-based company said it wouldn't bid after all.

Under U.K. rules, Takeda has until April 25 to formalize its offer, withdraw it or walk away.

A successful bid for Shire would mark Takeda's biggest-ever acquisition, creating a global drug giant with sales of about $30 billion a year. However, the Japanese company would likely have to take on significant debt to fund it. At roughly $50 billion, Shire's market value exceeds that of Takeda by more than $10 billion.

Cheap funding rates in Japanese yen would make that more palatable, but the company is still digesting borrowing done for previous acquisitions. Although Takeda's net debt is now a manageable 1.8 times earnings before interest, taxes, depreciation and amortization, that would likely balloon if the company has to borrow for the Shire deal.

Shares in Shire fell 3.9% to GBP38.22 on Friday. Earlier in the day, Takeda shares closed down 4.7%r.

Takeda, whose products include heartburn treatment Dexilant, said late last month it was considering a bid for Shire to strengthen its new-drugs portfolio and broaden its international footprint. Takeda has made several large acquisitions under Chief Executive Christophe Weber and his predecessor, including a $4.7 billion agreement last year to buy Cambridge, Mass.-based Ariad Pharmaceuticals, the maker of the leukemia treatment Iclusig.

Shire is best known in the U.S. for its attention deficit hyperactivity disorder drug Adderall, but it has more recently developed into one of the world's biggest makers of drugs for rare diseases, expanding quickly under the leadership of Chief Executive Flemming Ornskov.

The pharmaceutical industry has been a hotbed of deal activity recently as companies look to consolidate amid various industry headwinds. Last month, GlaxoSmithKline PLC said it would pay Novartis AG $13 billion for its 36.5% stake in their consumer health-care joint venture. In January, France's Sanofi SA said it would buy hemophilia drugmaker Bioverativ Inc. for more than $11.5 billion.

Shire has regularly been involved in deal talks in recent years.

In 2014, a $54 billion takeover of Shire by Illinois-based AbbVie Inc. was called off because of new U.S. tax rules aimed at deterring American companies from moving their legal headquarters to lower-tax countries.

Under Takeda's proposal Friday, the company would maintain its headquarters in Japan and its primary listing on the Tokyo Stock Exchange, but it would put in place a New York-listed American depositary receipt program to allow current Shire shareholders to continue to hold shares in the combined company.

Under U.K. rules, Takeda has until April 25 to formalize its offer, withdraw it or walk away.

--Ben Dummett contributed to this article.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com

 

(END) Dow Jones Newswires

April 21, 2018 02:47 ET (06:47 GMT)

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