Takeda proposes to acquire Shire in $65bn deal

BY Fraser Tennant

In a deal that could spark a new wave of big pharma deals, Japan’s Takeda Pharmaceutical Company Limited has made a $65bn offer to acquire Jersey-based rare disease drugmaker Shire Plc.

The deal, if completed, would be the biggest acquisition of a drug company this year.

Earlier this week, the board of Shire confirmed that it would recommend the offer to its shareholders, subject to satisfactory resolution of the other terms of the possible offer, including completion of reciprocal due diligence by Shire on Takeda.

With the deal in a preliminary phase, and Takeda having the right to make a lower offer or walk away should Shire receive a higher rival bid, the Japanese company, under UK takeover rules, is required to make its intentions known by 8 May 2018.

Long seen as a likely target for a takeover, Shire was almost acquired by US drugmaker AbbVie Inc in 2014, until reforms to US tax rules scuppered the deal. In addition, Shire was the subject of an aborted acquisition attempt by Botox-maker Allergan Plc last week.

A firm offer by Takeda for Shire is subject to the following conditions: (i) satisfactory completion of a confirmatory due diligence review by Takeda; (ii) the unanimous and unconditional recommendation of the board of Shire; and (iii) final approval by the board of Takeda.

If the deal gets the go-ahead, it would be the largest overseas acquisition by a Japanese company and make Takeda one of the world’s leading drugmakers. The offer to acquire Shire is the fifth to have been made by Takeda in recent months. This proposal is worth 49.01 pounds per share, comprised of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash.

At completion, Shire shareholders would own approximately 50 percent of the enlarged Takeda and the new Takeda shares will be listed in Japan and in the US through an American Depositary Receipt (ADR) programme.

A global leader in serving patients with rare diseases, Shire develops best-in-class therapies across a core of rare disease areas, including hematology, immunology, genetic diseases, neuroscience and internal medicine, with growing therapeutic areas in ophthalmics and oncology. The firm reaches patients in more than 100 countries.

However, the firm has been struggling with debt and sold its oncology business to a French drugmaker for $2.4bn earlier this month.

News: Shire willing to back $64 billion Takeda bid, market signals doubts

Stable but sluggish

BY Richard Summerfield               

The UK is expected to see GDP growth of 1.6 percent in 2018, according to the latest EY ITEM Club Spring Forecast.

Continuing 2017’s "uninspiring" growth levels, the country’s 2018 forecast has actually been slightly downgraded from 1.7 percent. Q1 GDP figures are expected to show growth of just 0.2 -0.3 percent, primarily due to the severe weather that hit the country at the end of February and beginning of March. The final quarter of 2017 saw 0.4 percent year-on-year growth.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “The UK economy is chugging along at a fairly steady but uninspiring rate. On the surface, the outlook appears stable. Inflation, which impacted consumer spending last year, continues to drop and we expect a tight jobs market to deliver some uptick in pay growth. Significantly, a transitional Brexit agreement between the UK and EU has been agreed which should also bring some certainty to businesses and support investment, although it still needs to be ratified. However, these factors may be offset by rising interest rates, a recovery in sterling’s value and still appreciable Brexit uncertainties bringing new headwinds over the year.”

EY expects the second quarter of 2018 to see quarter-on-quarter growth of 0.5 percent. Consumers are expected to experience a ‘double positive’ for real income growth moving forward, with inflation set to fall and stronger pay growth anticipated.

Household income growth is expected to reach 1.2 percent in 2018, rising to 1.4 percent in 2019, a marked improvement on 2017’s 0.2 percent increase. However, the income growth is not expected to translate into an improvement on 2017’s 1.7 percent rise in consumer spending.

The economic uncertainty caused by the ongoing Brexit negotiations should be alleviated shortly, and business investments should benefit as a result, according to the report. Yet due to the weak growth recorded in the second half of 2017, business investment in the UK is only expected to grow by 1.7 percent in 2018 before picking up to 2.7 percent in 2019.

However, Brexit is not the only cloud on the horizon. “Potentially adverse developments in trade policies and geopolitics could hit trade flows”, according to Mark Gregory, EY’s chief economist, UK. Though a resurgent global economy bolstered the UK’s economy, geopolitical headwinds could still curtail growth in the coming months.

Report: EY ITEM Club Spring Forecast 2018

Cyber attacks double as resilience grows

BY Richard Summerfield

Targeted cyber attacks have doubled in the last year, according to Accenture Security’s latest ‘State of cyber resilience’ study.

The report, which surveyed 4600 executives from large organisations around the world, found that the volume of targeted attacks reached 232, up from 106 in Accenture’s 2017 report.

Ransomware and distributed denial of service (DDos) attacks in particular have been on the rise over the last 12 months. Though organisations are increasingly able to block attacks (87 percent of focused attacks were repelled last year, up from 70 percent in the 2017 report), 13 percent of focused attacks were able to penetrate defences.

Accordingly, organisations are still facing an average of 30 successful security breaches per year which cause damage or result in the loss of high-value assets, which is unsustainable in the long run.

“Only one in eight focused cyber attacks are getting through versus one in three last year, indicating that organisations are doing a better job of preventing data from being hacked, stolen or leaked,” said Kelly Bissell, managing director of Accenture Security.

“While the findings of this study demonstrate that organisations are performing better at mitigating the impact of cyber attacks, they still have more work to do. Building investment capacity for wise security investments must be a priority for those organisations who want to close the gap on successful attacks even further. For business leaders who continue to invest in and embrace new technologies, reaching a sustainable level of cyber resilience could become a reality for many organisations in the next two to three years. That’s an encouraging projection,” he added.

Companies are also getting better at detecting breaches when they do occur. On average, 89 percent of respondents said their internal security teams detected breaches within a month, compared to only 32 percent last year. This year, 55 percent of organisations took one week or less to detect a breach, up from 10 percent last year.

New technology, such as artificial intelligence, machine learning, user behaviour analytics and blockchain, have been helping companies to fight off cyber attacks. Eighty-three percent of respondents agreed that these new technologies are essential to protecting their organisations.

However, there is much more work to be done. Respondents said only two-thirds of their organisations are actively protected by their cyber security programme. This must improve; companies should be proactive in designing and deploying their threat defences.

Report: 2018 State of Cyber Resilience

Breitburn completes Chapter 11 to emerge as Maverick

BY Fraser Tennant

Following a near two-year bankruptcy, struggling energy company Breitburn Energy Partners LP has  emerged from Chapter 11 reorganisation and begun operations as Maverick Natural Resources, LLC – a newly-formed company owned and operated by private equity (PE) firm EIG Global Energy Partners.

Despite being a major acquirer, explorer and developer of oil and gas properties in the US, Breitburn was among the dozens of energy companies that filed for bankruptcy in 2016 after a lingering slump in commodity prices that began in late 2014. Now having successfully completed Chapter 11 reorganisation, Breitburn has returned as a new EIG-backed company, Maverick.

As a result of the Chapter 11 restructuring process, Maverick has an approximate debt of $105m, substantially lower than Breitburn’s $2.96bn debt balance prior to initiating the restructuring process. Furthermore, Maverick has approximately $295m of additional borrowing capacity under a new bank credit facility, and its balance sheet provides it with significant financial flexibility and positions the organisation for long-term success.

Specialising in private investments in energy and energy-related infrastructure on a global basis, EIG has been one of the leading providers of institutional capital to the global energy industry since 1982.

“We are pleased to close this chapter and focus on generating value for the Maverick platform,” said Clayton Taylor, managing director of EIG. “Maverick will emerge with low leverage, a simple balance sheet and sufficient liquidity to remain adaptive to the ever-changing market conditions. Following a judicious review of the asset portfolio and cost structure, we believe Maverick is well-positioned to capitalise on cost reduction initiatives, to deploy capital to high growth prospects and to potentially build the platform through strategic acquisitions.”

A portfolio company majority-owned and controlled by funds and accounts managed by EIG, Maverick is focused on the development and production of long-lived oil and gas reserves throughout the US.

“The Chapter 11 reorganisation marks a new beginning for our company and all of our stakeholders and the end of a difficult period managing through the steep and sustained decline in oil and natural gas prices,” said Halbert S. Washburn, Maverick’s chief executive. “Throughout the extended restructuring process, we remained focused on our key goals of managing production and reducing costs to preserve the value of our diverse and long-lived portfolio, substantially reducing debt and dramatically improving our liquidity position, and achieving a consensual plan of reorganisation among our key creditor groups.”

News: Breitburn Energy Partners Successfully Completes Chapter 11 Reorganization Emerges As Newly Formed Maverick Natural Resources LLC

Global M&A value hit record high in Q1 2018, reveals new report

BY Fraser Tennant

The dramatic surge in dealmaking activity at the tail end of 2017 has continued into 2018, with the value of global M&A reaching a record Q1 value, according to a new report by Mergermarket.

In its ‘Global & Regional M&A Report Q1 2018’, the M&A data and intelligence provider notes that: (i) global M&A reached record levels as corporates pursue innovation through M&A; (ii) private equity (PE) activity recorded its fourth consecutive $100bn figure quarter for buyouts; and (iii) Q1 2018 deal value is up 18 percent on Q1 2017’s value, recording $890.7bn (across 3774 deals).

In addition, while large tech companies have looked to diversify their offering through M&A, more traditional firms also had to react to newer, more innovative firms, with many looking towards defensive consolidation. Recent trade disputes between China and the US have served to boost these defensive strategies further.

Furthermore, global PE activity remained remarkably high, with many investors pursuing larger targets as the mid-market became saturated. In Q1 2018 there were 699 buyouts worth a total of $113.6bn, representing the strongest start to the year since 2007. Q1 2018 is also the fourth consecutive quarter in which buyout activity has reached the $100bn figure.

“The extraordinary surge in dealmaking seen at the end of 2017 has carried through into 2018,” said Jonathan Klonowski, EMEA research editor at Mergermarket. “Global M&A hit its highest Q1 value on record as pressure from investors and the search for innovation continues to push corporates towards M&A. PE activity also rebounded to pre-financial crash highs.”

In addition, the report reveals that 14 deals which breached the $10bn mark have been recorded so far this year, including the $67.9bn deal between Cigna and Express Scripts and the $46.6bn transaction which will see German utility Eon acquire Innogy, a subsidiary of German energy company RWE. 

Mr Klonowski added: “Following on from the trend seen in 2017, intra-European dealmaking has once again been active across the continent in the first quarter with the top three deals all being conducted between European companies.”

Report: Global & Regional M&A Report Q1 2018