Takeda wins auction for Nycomed

Takeda agrees to pay $14 billion for Swiss drug company Nycomed in Japan's largest-ever pharma M&A deal.

Takeda Pharmaceutical is set to buy Nycomed for €9.6 billion ($13.7 billion) in cash, in Japan’s second-largest outbound M&A deal and its largest healthcare M&A deal.

Takeda is already Japan’s largest pharmaceutical company and the acquisition will consolidate its position by some margin. But, equally, the deal will add to Takeda’s drug pipeline and its geographical reach.

Nycomed is well established in Europe and some high-growth emerging markets, with the majority of its revenues from prescription pharmaceutical products and a smaller presence in over-the-counter products. This complements Takeda’s presence in the Japanese and US markets and immediately doubles Takeda’s European sales. Nycomed’s more than €2.8 billion in revenue last year, excluding the US dermatology business, which is not part of the deal, provide an immediate 30% fillip to Takeda’s revenues. Takeda’s earnings per share will also increase by 30%.

Nycomed, which is headquartered in Zurich, was auctioned by its private equity owners, led by Nordic Capital and including DLJ Merchant Banking Partners, Coller International Partners and Avista Capital Partners. The consortium of financial sponsors bought Nycomed in 2005. For Nordic Capital this is the second time it has sold Nycomed. The Stockholm-based private equity fund first bought Nycomed in 1999, then sold it in 2002 to DLJ Merchant Banking and Blackstone. In 2005, Nordic invested in Nycomed once again.

Growth through M&A is a strategy the Japanese buyer has successfully adopted in the past. In 2008, Takeda bought Nasdaq-traded Millennium Pharmaceuticals for $8.8 billion, providing it with a pipeline of cancer drugs. When the deal was struck it was the largest outbound M&A deal by a Japanese drug company.

Takeda was the frontrunner in the auction for some time, but most large drug companies were rumoured to be interested in Nycomed.

The acquisition will be financed by Takeda through cash on its balance sheet and debt. In an investor call after the deal was announced yesterday, Takeda management stressed that it had no plans to approach shareholders or issue equity to finance the deal.

Moody’s said in a ratings update yesterday that the deal “will help Takeda offset the impact of a decline in the sales and profits of its major products due to its patent expiries in the US”. Most analysts on yesterday’s call also commented favourably on the strategic fit of the deal. However, Moody’s said the deal could result in a multi-notch downgrade of Takeda’s current Aa1 rating as it would “weaken Takeda’s excellent balance-sheet liquidity and balance-sheet structure”.

Deutsche Bank advised Takeda on the deal. Both Deutsche and Nomura have provided fairness opinions to the Japanese drug major. Credit Suisse and Goldman Sachs worked for the private-equity sellers.

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