SHPGY Shire Plc ADS, Each Representing Three Ordinary Shares (MM)

By Preetika Rana 

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 (December 6, 2018).

Takeda Pharmaceutical Co. shareholders voted in favor of its megadeal to buy Europe's Shire PLC on Wednesday, crushing an opposition campaign that sought to derail the biggest overseas acquisition by a Japanese company.

At least 88% of votes cast were in favor, according to Takeda, dealing a blow to a group of longtime shareholders who had lobbied to block the cash-and-stock merger, valued at about $58 billion today. The dissidents argued Takeda was overpaying for Shire and piling on too much debt to do so, though they conceded before the vote that they hadn't won enough support to derail the deal.

The vote was a resounding victory for France-born Chief Executive Christophe Weber, one of the few foreigners at the helm of a major Japanese company. Buying Shire would enable Takeda to tap into the lucrative market for rare diseases and boosts Mr. Weber's mission to expand Takeda's footprint beyond its slowing home market.

Shire's shareholders separately voted overwhelmingly in favor late Wednesday.

The acquisition propels 237-year-old Takeda into the big leagues, making the combined entity the world's eighth-largest drugmaker by sales, and reflects how Japan's corporate titans are looking abroad to fuel growth. Together, the companies would be estimated to earn half their revenue from the U.S., up from the roughly one-third that Takeda makes now. Takeda also estimates annual savings would reach at least $1.4 billion three years after the merger.

Mr. Weber has ruffled shareholder feathers before, cutting jobs in a bid to consolidate research and hiring other non-Japanese senior executives. But the Shire acquisition was his boldest move since taking the reins in 2014.

In a sign of how ardently Japan's legacy companies are looking overseas, Takeda increased its bid four times before Shire's board agreed in May to settle on a cash-and-stock offer that valued it at GBP49.01, or $66.21, a share at the time, a 65% premium over Shire's closing share price before news of the deal surfaced in late March.

It placed Takeda's valuation of Shire at $62 billion at the time. Currency fluctuations and a fall in Takeda's share price mean the current-day value is $58 billion. That still tops SoftBank Group Corp.'s $32 billion acquisition of U.K.-based chip designer ARM Holdings PLC in 2016 -- the largest overseas acquisition by a Japanese company until now.

On Wednesday, Takeda's stock closed up 1% from Tuesday's close, although it is down 25% since news of the first bid surfaced in late March. Shire shares have gained more than 50% over the same period.

Critics argued the acquisition saddles Takeda with debt. The company has said it would borrow about $31 billion to fund the deal, which puts its net debt at five times its earnings before interest, tax, depreciation and amortization. The higher that ratio, the lower the chance lenders advance loans, constraining the company's ability to borrow in the future.

Members of the dissenting shareholder group argued Takeda was paying too much for a rare-disease-focused target whose top-selling hemophilia drugs are about to face stiff competition from a Roche Holding AG rival that the U.S. recently approved.

The "no" campaigners, who dubbed their group TTBF or "Think About Takeda's Bright Future," hired a former UBS Group AG analyst to lobby American institutional investors to vote against the deal. In recent weeks, the group won the backing of another prominent shareholder, a former Takeda chairman who was the last member of the founding Takeda family to run the company.

At a luncheon in New York in late October, Shigeru Mishima, the former UBS analyst, warned 20 institutional investors, mostly American hedge funds, about the risks associated with the deal. "'I said, 'What's going to happen in three years when the risks associated with the hemophilia treatment play out?'" he said.

Mr. Mishima said the group was disappointed with Wednesday's vote, even though they knew they were likely to fall short of the one-third of votes needed to stall the deal.

Mr. Weber said in a statement that he was delighted that shareholders had backed the acquisition. The CEO said he is working to create "a more competitive, agile, highly profitable, and therefore more resilient company."

The test for Takeda, analysts said, will be its ability to integrate Shire's empire with its own and whether expected job cuts would lead to a backlash in Japan.

Several prominent foreign CEOs in Japan have seen their terms end in controversy or scandal. Most recently, Carlos Ghosn was ousted as chairman of Nissan Motor Co. after being arrested in Tokyo on suspicion of understating his compensation in financial reports. Mr. Ghosn has denied wrongdoing, according to Japanese public broadcaster NHK, and hasn't been formally charged.

Mr. Weber told The Wall Street Journal in 2014 that when he joined Takeda, he sought advice from the France-educated Mr. Ghosn in Paris. Mr. Weber said the talk reassured him that he was up for the challenge of thriving in Japan's insular corporate culture.

Peter Landers contributed to this article.

Write to Preetika Rana at preetika.rana@wsj.com

(END) Dow Jones Newswires

December 06, 2018 02:47 ET (07:47 GMT)

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