Shire said today its board has rejected at least two takeover proposals by Takeda Pharmaceutical, but both companies have confirmed that they remain in talks about a possible acquisition.

Shire’s board turned down Takeda’s initial approximately £41 billion ($58.4 billion) takeover offer, which would have left Shire shareholders owning 50% of the combined company—and a third proposal in which Takeda raised its offer for Shire to approximately £44 billion ($62.6 billion), and would have given Shire shareholders about 51% of the Shire–Takeda combo.

Not clear from Shire’s announcement is whether the board additionally rejected Takeda’s second takeover offer of approximately £43 billion ($61.2 billion).

Also unclear is whether Takeda’s offers for Shire included Shire’s oncology business—which Shire said Monday it agreed to sell to Servier for $2.4 billion. Takeda has previously said that expanding its oncology business was a significant reason why it was considering a bid for Shire, along with the desire to expand in along with gastrointestinal medicine and neuroscience. All three categories are among Takeda’s key therapeutic areas.

“Following the Board meeting on April 14, 2018 which rejected the third proposal, at the Board's request, Shire's advisers entered into a dialogue with Takeda's advisers to discuss whether a further, more attractive, proposal may be forthcoming and to understand the basis on which such a proposal would be made,” Shire stated.

Takeda issued a separate statement confirming details of its third proposal, and added: “Discussions between the parties regarding a potential offer are ongoing.”

“Takeda and its Board reiterate that it will remain disciplined with respect to the terms of any such offer,” the would-be buyer stated.

Takeda disclosed its interest in bidding for Shire last month. Under U.K. regulations governing mergers and acquisitions, Takeda had until April 25 to make a formal bid or pass on Shire.

Takeda’s bid had been expected to be in the $50 billion range, since Shire has a market value of about $47 billion. Takeda’s market value is about $38 billion.

Appetite for Acquisitions

Shire disclosed details of Takeda’s three proposals. Takeda’s initial bid priced Shire at £44 (nearly $63) per share, consisting of £28 (about $40) per share in new Takeda shares, to be listed in Japan and in the U.S. through an American Depositary Shares listing, and £16 (about $23) per share cash.

“Following a thorough review of the First Proposal with its advisers and a Board meeting on April 8, 2018, the Board unanimously rejected the First Proposal, concluding that it significantly undervalued the Company, its growth prospects and pipeline,” Shire stated.

Takeda sweetened its initial offer for Shire twice:

  • Second proposal—A total £45.50 (about $65) per share, consisting of £28.75 (nearly $41) per share in new Takeda shares, to be listed in Japan and in the U.S. through an ADR listing, and £16.75 (about $24) per share cash.
  • Third proposal—A total £46.50 ($66) per share, retaining the £28.75 (nearly $41) price per share in new Takeda shares, but raising the share price in cash to £17.75 ($25).

Takeda expanded its oncology and hematology portfolios last year by acquiring Ariad Pharmaceuticals for $5.2 billion. A few months earlier, Takeda also sought to acquire the Salix Pharmaceuticals unit from Valeant Pharmaceuticals international, but talks collapsed when the companies couldn’t agree on a price.

Under CEO Christophe Weber, Takeda has increasingly sought to grow through mergers and acquisitions, in light of the shrinking population in its home market of Japan, as well several patent expirations, including that of blood cancer treatment Velcade® (bortezomib).

“Building on Takeda’s existing momentum, the acquisition of Shire would accelerate its transformation and result in a global, value-based, R&D-driven biopharmaceutical leader headquartered in Japan, with a balanced geographic footprint, a robust, modality-diverse pipeline, and enhanced financial strength,” Takeda stated.

“Irrespective of the outcome of discussions between the two parties,” Takeda added, “Takeda remains well positioned to continue its transformation, delivering portfolio growth while strengthening its pipeline and boosting profitability.”

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