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By PharmaCompass
2018-12-20
Impressions: 270 Article
Finally, the expected seems to have happened. This week, Moody’s Investors Service downgraded Takeda Pharmaceutical’s credit rating citing the drugmakers' mounting debt following its US$ 62 billion acquisition of Shire Plc. Takeda’s rating is now two notches above the junk status.
According to a statement, Moody’s cut Takeda’s credit rating three notches to Baa2 from A2.
This led to a decline in the stock price of Shire, which dropped as much as 2.1 percent in early trading in London on Monday.
Moody’s, as well as other ratings agencies, had put Takeda on watch for a possible cut in its credit rating since the agreement to acquire Shire was announced in May. Takeda’s CEO Christophe Weber had said at the time that he expected the company’s credit score to be lowered, but remain investment grade.
“This transformative acquisition will cause Takeda’s debt to increase almost six-fold, making the company one of the most leveraged pharmaceutical companies rated investment grade,” Moody’s analyst Yukiko Asanuma said in a statement.
Post the acquisition, Takeda will take on around US$ 30 billion in new borrowing as well as Shire’s existing US$ 13.7 billion of debt. The deal will increase its net debt-to-earnings ratio to around five times earnings. The global industry average is one.
Last month, Takeda had said it will consider selling off up to US$ 10 billion in assets to slash the debt from its planned purchase of Shire. However, Moody’s said Takeda faces risks in successfully disposing of enough assets and integrating Shire to realize the expected cost synergies.
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