Allergan Pulls Out of Shire Deal, But Takeda Push Forward
Allergan has retracted its interest in pursuing a deal for Shire, only a mere few hours after originally saying so.
After confirming that it would not make an offer, the company concluded, “Allergan continues its ongoing process of evaluating a full range of potential strategic actions that will create value for shareholders, such as divestitures, combinations, and acquisitions.”
Despite the reasons for such a shift in attitude remaining unclear, it wouldn’t be a surprise if the shareholder backlash played a part, writes PharmaFile. Shares dropped by 7% before Allergan revealed it wouldn’t pursue the deal, with their value remaining down 4%.
As of now, Takeda Pharmaceutical is the only known current party interested, and it would seem that they mean business. This is reflected in the three offers that they have submitted. However, it is important that they bear in mind that it doesn’t mean they are the front-runners, even if Allergan did retract their interest in less than 24 hours.
In the meantime, Shire revealed that Takeda had offered $63 billion cash-and-stock conditional offer, which it had rejected alongside two other bids. The sticking point seems to be the proportion of the deal that was made up by Takeda stock, with Shire preferring a larger cash portion of the deal. The previously rejected deal would have seen Shire shareholders own 51% of the proposed merged company. This reflects doubts over the value of such shares, especially given that Takeda is already stretched thin by the deal and the merged company would be loaded with a large amount of debt.
This is part of the risk when two similarly sized businesses attempt to confirm a deal, as Shire already knows from its merger with Baxalta. “Takeda moved to reassure shareholders that it would be prudent in its pursuit,” the company said.
“Takeda and its Board reiterate that it will remain disciplined with respect to the terms of such offer. As previously stated, Takeda intends to maintain its well-established dividend policy and investment grade credit rating.”
With Allergan now out of the deal altogether, only time will tell to see how far Takeda is willing to stretch itself on the deal and how willing Shire’s board will be in accepting a large amount of the future company’s share to make up the weight of the deal.