Shire plc (NASDAQ:SHPG) Weekly Ratings on April 24, 2018

Virginia Carson
April 25, 2018

Shire plc (NASDAQ:SHPG) announces that it has received a revised offer from Takeda Pharmaceutical Company (OTCPK:TKPYY).

Under terms of its fifth proposal, the Japanese company would offer 0.839 of its shares and 21.75 pounds in cash for each ordinary Shire share, or about 49 pounds apiece.

Societe Generale reduced their price target on Shire from GBX 8,000 ($111.58) to GBX 7,500 ($104.60) and set a "buy" rating for the company in a report on Wednesday, February 28th. The deadline can be extended at the request of Shire.

Shares in both companies were down, with Takeda's value sliding heavily because of investors' concerns over the risks of such a big merger. That said, Takeda stock price fluctuations are equally understandable, pricing in the risk that the firm is taking in acquiring Shire, and the financial burden it will add to fund it.

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Shire focuses on treatments for rare diseases and attention deficit hyperactivity disorder and a takeover would catapult Takeda into the top ranks of global drugmakers.

Shire's share price has been subdued in London in today's session following yesterday's rally, having given up 0.87 percent to 3,896.00p as of 10:04 BST.

Takeda, led by Frenchman Christophe Weber, has been actively looking overseas for acquisitions. But not by the direction of Takeda's share price, which they are nearly certain to be watching closer than to their own stock. "This huge acquisition bodes a spike in leverage that could result in a multi-notch downgrade", said analyst Yukiko Asanuma. The company has market cap of $48.58 billion. On Wednesday, February 14 Piper Jaffray maintained the shares of SHPG in report with "Hold" rating.

Takeda and Shire did not immediately respond to requests for comment.

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This isn't the first M&A bid for Shire - a $52 billion takeover by AbbVie had been agreed but was terminated in 2014 because of a change in U.S. tax rules.

Botox-maker Allergan Plc said last week it was considering making a rival offer, only to scrap it hours later due to pushback from shareholders.

Shire 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.

Last Friday, it increased its informal bid to £42.8 billion, after Shire rejected three previous overtures as too low.

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