Shire plc (NASDAQ: SHPG)announced on Monday that it has entered into an agreement to sell its oncology business for $2.4 billion to Servier S.A.S., amid Takeda Pharmaceuticals potential takeover attempt.
The sale of the segment to the French pharma, which produces treatment for leukemia and pancreatic cancer, unlocks embedded value within Shire’s portfolio and refocuses the company into its rare disease portfolio.
The acquisition will also allow Servier to expand its business into the U.S. The segment drew in $262 million in revenue in 2017.
“This transaction is a key milestone for Shire, demonstrating the clear value embedded in our portfolio. While the Oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire’s longer-term strategy. We will continue to evaluate our portfolio for opportunities to unlock further value and sharpen our focus on rare disease leadership with selective disposals of non-strategic assets.” said Flemming Ornskov, Shire Chief Executive Officer.
Ornskov also said the Board will consider returning the proceeds from the transaction to shareholders through a buyback after Takeda’s offer finishes.
Last month, reports loomed around of Takeda considering a buyout anywhere from $40 billion to $50 billion, which sent Shire shares up by 17 percent then to a market capital of $46.3 billion. Takeda said it was in its “preliminary and exploratory stage.”
The deal may be more attractive to Takeda as it does not have to offer as much, especially after its acquisition of Ariad Pharmaceuticals for $5.2 billion last year. Although the sale to Servier can make the acquisition cheaper, it still doesn’t solve the problem that Takeda and Shire share a similar market value.
“Takeda is just desperate to beef up its pipeline, and they’ve been doing small bits of acquisitions on the biotech side,” said Fumiyoshi Sakai, a Tokyo-based analyst at Credit Suisse Securities. “But how they are going to finance $40-some billion? That’s another one.”
Shire shares were trading 2.11 percent higher after Monday’s opening bell.
Takeda must announce its offer by April 25 under the UK Panel’s regulations.
The transaction is expected to close in the second or third quarter of 2018.