Shares in Shire PLC (LON:SHP) were 4% higher after the drugs company confirmed it had received a revised takeover proposal from Takeda of Japan ahead of Wednesday's bid deadline.
"The board is considering its position," Shire added. "There can be no certainty that any firm offer for the company will be made nor as to the terms on which any firm offer might be made."
On Friday, the Japanese drugs giant tabled a £43bn (US$60bn) cash and shares bid for the Ireland-headquartered, FTSE 100-speciality pharma business.
READ: Shire: Takeda deadline looms, but will other bidders emerge for in-play £43bn drugs group?
No financial details were revealed. But it would appear from a report carried on the Bloomberg newswire, the headline number hasn’t radically changed, which suggests there may have been a little more play on the cash element of the offer, which had been an issue for Shire investors.
Citing sources close to the matter, Bloomberg told readers: “Discussions this week have revolved around an improved offer, including a possible increase in the cash component ... The exact terms of the offer couldn’t be immediately learned.”
At 3pm, Shire shares were trading up £1.42 at £39.42 each, more than £7 shy of £47 tabled by Takeda on Friday.
Competing offers?
Analysts say a preliminary deal between the two could encourage potential counter-bidders out of the woodwork with Novartis (VTX:NOVN), AbbVie Inc (NYSE:ABBV) and Pfizer Inc (NYSE:PFE), among the names touted.
In fact, most established large pharma companies will have what’s called a “takeout model” for Shire.
The current round of interest will simply crystallise the will to move forward or force companies to permanently shelve any lingering interest.
AbbVie walked away
AbbVie walked away from a planned £39bn swoop for Shire in 2014 after changes to US tax rules that would have allowed it to take advantage of lower corporate tax rates outside the US.
The logic today is not one of engineering the best tax deal, given the cuts to US levies by President Donald Trump, but garnering cost savings and finding synergies between drug pipelines.
There is value-add for Takeda across the oncology, gastro-intestinal and neurology portfolios, analysts reckon.
Most of the interested parties will have been attracted by Shire’s low valuation, which before the latest round of interest, was barely above eight-times core earnings.
But value could be destroyed if Takeda or another bidder goes on the offensive.
Hostile deals don't work
“Hostile takeovers have just not worked in recent years,” said Jefferies analyst David Steinberg, citing the collapse of the Mylan-Perrigo, Valeant-Allergan and Teva-Mylan deal.
He also believes the company should start a beauty parade, given the interest.
“If they haven’t – and now given Takeda’s clear interest – it would seem at this point the right move would be to start one in order to maximise shareholder value, in our view.”
Takeda has until noon tomorrow (Wednesday) to lodge a formal offer.
A source close to the negotiations told Proactive Investors that another update on the negotiations is imminent, but indicated that it would not likely be the final update before tomorrow's deadline.
-- This article was updated to include comments regarding a future update.