Investors weren’t happy when Christophe Weber, the CEO of Japanese pharmaceuticals maker Takeda, said in March 2018 that he would pursue an expensive takeover of Irish rival Shire.
Takeda has roots in Japan that go back 250 years. Some members of the company’s founding family — who are still big shareholders — were queasywhen Weber made the announcement. The stock fell nearly 20%. Industry watchers were stunned when, a few months later, Weber clinched the deal at $62 billion. Takeda is paying nearly 60% more than Shire’s stock price at the time of Weber’s first bid. Takeda will also borrow some $30 billion. Moody’s and S&P Global slashed Takeda’s credit rating as a result.
“It was extremely shocking,” Karen Andersen, an analyst at investment research firm Morningstar, recalled. “At first glance, it would look like something that is incredibly risky.”
Risky or game changing — and for Weber, who orchestrated the deal, extremely ambitious.
It was the biggest takeover ever undertaken by a Japanese company. Even Masa Son, the acquisitive head of SoftBank and probably Japan’s most famous CEO, has never done a merger close to that size.
Weber argues the Shire takeover was necessary to transform Takeda into a major force in the global pharma market. “It’s really part of this long-term aspiration to be a global player,” he said during a December panel discussion in New York. (Takeda declined to make Weber available for an interview for this story.)
Weber, a French citizen, joined Takeda in 2014 after spending the bulk of his career in senior roles in Europe, Asia and the United States for British drugmaker GlaxoSmithKline.
At Takeda, he was promoted to thetop job after just a year. His appointment as Takeda’s first foreign boss was controversial. Foreign CEOs are rare in Japan, and experts say they are often appointed only as a last resort.
Takeda started out in the 18th centuryas a small store selling traditional Japanese medicines. It listed on Tokyo’s stock exchange in 1949.
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Although its recent earnings have been strong, Takeda could face tough times ahead. The company makes drugs that treat cancer, but its pipeline of new products is thin. Takeda also does most of its business in Japan, where regulators are pushing for cheaper generic drugs as the population ages rapidly.
“They were in a position where they had to do something dramatic,” said Andersen. Shire will give Takeda new revenue streams, such as medicines for rare diseases, and a bigger share of the more lucrative American market.
Ruffling feathers in Japan
“This was a big shift for Takeda and not without protests from Japan,” said Peter Feldinger, a former senior executive at Takeda and now a consultant. People thought that Takeda should have a Japanese leader, he added.
But it was the right move. “There was not … a Japanese [executive] that could step into the role as CEO,” Feldinger said.
Weber has overseen profound change at the firm, including expansion outside of Japan and significant cost-cutting measures.
The company is reportedly trying to sell its Osaka headquarters and is cutting spending on research and development. This kind of approach is uncommon in Japan.
Weber is “trying to orchestrate the emergence of a truly global pharma company with Japanese roots and heritage,” Feldinger said.
Not everyone sees it that way.
Shigeru Mishima, a former analyst who advised minority shareholders in a failed attempt to stop the Shire deal, said Takeda will be weighed down by huge debts for years to come. He worried that the foreign adventure could go wrong, pointing to Toshiba’s costly foray abroad.
He would rather Takeda focus on Japan and smaller acquisitions to grow its market share. The plunge in the company’s stock price since its first approach to buy Shire is proof Weber is on the wrong path, he added.
But the CEO isn’t worried about ruffling feathers. Weber said in December: “When you do such a bold move, you cannot convince everyone.”