Takeda Pharmaceutical Buys PE-Backed Nycomed for $13.6B

Japan’s largest drugmaker, Takeda Pharmaceutical Co., will pay $13.6 billion to buy private equity backed rival Nycomed, Reuters reported. Zurich-based Nycomed is majority owned by four private equity firms, led by Nordic Capital with 41%. Credit Suisse’s DLJ Merchant Banking has 25.6%, Coller International Partners 9.7% and Avista 8.9%.

(Reuters) – Takeda Pharmaceutical Co , Japan’s largest drugmaker, is buying privately held Swiss rival Nycomed for $13.6 billion, giving it access to a newly approved lung-disease drug, which is expected to be a major source of revenue growth.

The deal marks the biggest overseas purchase by a Japanese company since Japan Tobacco paid $19 billion for Britain’s Gallaher and is Takeda’s second major deal after acquiring U.S. cancer specialist Millennium Pharmaceuticals for $8.8 billion in 2008.

Takeda, known for its top-selling diabetes drug Actos which faces the upcoming expiry of its U.S. patent, will also gain a portfolio of over-the-counter consumer products.

The deal will help it expand in Europe and emerging markets and provide an immediate increase in stable cashflow.

“In the long-term, this is a strategic fit. The question of how to strengthen their presence in emerging markets is one that all major drug firms face,” said Atsushi Seki, pharmaceuticals analyst at Barclays Capital.

“But in terms of Takeda’s goal to return to last year’s earnings level by the year ending March 2016, I don’t think this deal quite gets them to the point where they are filling in the gap left by Actos’ patent expiry.”

Nycomed is well-placed in Russia and Brazil and last year bought a majority stake in a Chinese firm. Emerging markets, which made up nearly two-fifths of its revenue in 2010 and should make up 60 percent of sales by 2015. Emerging markets sales leapt 30 percent last year.

ANOTHER DEAL POSSIBLE

The 9.6 billion euro payment is inclusive of Nycomed’s net debt and Takeda will pay cash, financing part of that with a 600-700 billion yen ($7.3-$8.5 billion) loan. The deal, which excludes Nycomed’s U.S. dermatology business, had been expected after being flagged by sources last week.

The deal lifts Takeda’s global ranking to No. 12 from No. 16 and Chief Executive Yasuchika Hasegawa said the drugmaker was open to more acquisitions.

“In regards to further acquisitions, there will be opportunities but it’s the same as fishing, you don’t know if you will be able get partners just like you don’t know if you will be able to bring home fish,” he told a news conference.

Barclay’s Seki noted that Takeda has said it would be able to borrow up to 1 trillion yen and if its funds on hand were added to this, the company still had another 700 billion yen to play with.

Other Japanese drugmakers have also been active in acquisitions in recent years.

Daiichi Sankyo acquired a majority stake in Indian generic drugmaker Ranbaxy for $4.6 billion, while Astellas Pharma Inc bought OSI Pharma for $4 billion and Eisai purchased MGI Pharma for $3.9 billion to boost their cancer drug pipelines.

Moody’s placed Takeda’s Aa1 credit rating on review for possible downgrade after the news, adding that the rating could drop by more than one notch and that it would look at its relationship with its banks before deciding any new rating.

Standard & Poor’s also said it had placed its Takeda ratings on creditwatch, adding that given Nycomed’s current credit quality and weak sales prospects for some of Takeda’s core drugs, it is likely that the long-term rating will be lowered at least one notch.

Takeda said the deal would mean a doubling in European sales, with result in an increase in annual revenue of more than 30 percent and an increase in annual operating income, excluding special factors derived from the acquisition, of more than 40 percent.

Zurich-based Nycomed is majority owned by four private equity firms, led by Nordic Capital with 41 percent. Credit Suisse’s DLJ Merchant Banking has 25.6 percent, Coller International Partners 9.7 percent and Avista 8.9 percent.

The deal allows Nycomed’s owners to sell their entire stake now, instead of a long wait for a flotation where they would initially have to retain significant stakes. A listing would probably have been done in Switzerland and was unlikely to take place before 2012, a person familiar with the matter said.

Nycomed’s lung drug roflumilast, known as Daxas in Europe and Daliresp in the United States, is the first in a new class of treatment for chronic obstructive pulmonary disease, a common breathing disorder often caused by smoking.

After some delays, it won U.S. approval in March where Forest Laboratories has the marketing rights. In Europe, Merck & Co has marketing rights.

Deutsche Bank acted as financial advisor to Takeda while Goldman Sachs and Credit Suisse acted as financial advisors to Nycomed.

Takeda’s shares ended 0.5 percent higher ahead of the statement in a Nikkei benchmark down 0.4 percent. Despite the size of the Nycomed deal, its shares have only declined 2 percent since talk of the deal emerged with some analysts noting that Takeda is maintaining an annual dividend of 180 yen.

Takeda has also unsuccessfully explored takeovers of other European drugmakers previously, including Organon and Sweden’s Meda AB (MEDAa.ST), according to sources. ($1 = 0.707 euros, $1 =81.775 Japanese Yen) (By James Topham and Ritsuko Shimizu; Writing and additional reporting by Edwina Gibbs; Editing by Anshuman Daga)