May 15, 2018 | Health Care | Europe | Ended

Shire / Takeda: Weighing Upside Versus the Acquirer Vote and Pipeline Risks

Takeda’s initial five-week pursuit for Shire that involved five proposals has led to a definitive, agreed UK takeover, but the deal is marred by an unconventionally wide risk arbitrage spread and a heavily sold, unloved acquirer. Whether this is the best deal for Shire, or Takeda, is not yet clear and we remain in the midst of a particularly precarious environment for risk arbitrage hedge funds. Shire / Takeda has its share of complexities and in this note we assess the key risks and anomalies of this cross-border deal, weighing these versus the upside presented. We provide our views on the best trading strategies in the face of the Takeda shareholder vote, the Shire pipeline, arbs’ inability to control the spread, borrow recall risks, the trading and timing uncertainties and factors surrounding antitrust, strategic rationale and third-party interlopers.

1. Current Risks: Takeda’s Vote, Shire’s Pipeline, Flows and Timing 2. Upside Considerations: Antitrust, Rationale and Counterbids for Shire 3. Break Prices and Logical Risk Arbitrage Trading Strategies 4. Transaction Details from the 2.7 Announcement

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