BB Healthcare to benefit from possible Shire takeover
London-listed BB Healthcare Trust (BBH) looks likely to be the main investment trust beneficiary of a potential takeover offer for Shire Pharmaceuticals, which may come about after Takeda released a statement suggesting it was evaluating such a move. Shire, which originated in the UK but is now Irish domiciled and US headquartered, saw its shares rise by ~17% on the news. BB Healthcare is the only healthcare-focused trust to have a top 10 shareholding in Shire, equivalent to 5% of its NAV.
The issuing of a statement of this type is a feature of the UK’s takeover code and triggers a one-month period in which the Japanese group must decide whether or not to make an offer. The statement therefore represents an opening gambit in a process designed to put pressure on the target, via its shareholders, into discussing a negotiated deal. Shire now has a market capitalisation of $39bn, which is only a shade under Takeda’s $40bn, so effectively the Japanese pharma group is looking to effect a transaction that is more akin to a merger. However, it is also worth noting that by disclosing its intention, it puts Shire into play and may draw out alternative, higher bids.
Furthermore, the move may be the event that triggers a new bout of M&A activity in the pharmaceuticals industry – this has been predicted widely as a consequence of changes in US tax laws enacted by President Trump. If so, it could also make other companies with a rare disease focus, such as Alexion Pharmaceuticals (held by several specialist trusts such as Tekla Life Science Investors (HQL) and BB Biotech (BBB)) or Biomarin, vulnerable to offers.
The timing is interesting as Shire’s shares have declined since reaching a peak in September 2015 and under-performed benchmarks. The shares peaked just ahead of Shire’s own bid for Baxalta, which gave it an increased presence in rare disease. More recently, it has discussed a spin-off of its neurological division, housing the large but declining attention deficit hyperactivity disorder franchise. Shire’s consolidation in rare disease was initially widely praised, but analysts have more recently become bearish about the future of Shire’s haemophilia franchise, as Roche rolls out its game-changing product in this market Hemlibra.
BB Healthcare’s top 10 holdings, as of the end of February, are shown in the table below.
| % of NAV | ||
| Align Technology | 8.1% | |
| Anthem | 7.2% | |
| Illumina | 5.3% | |
| Celgene | 5.0% | |
| Shire | 5.0% | |
| Amerisource Bergen | 4.8% | |
| Wallgreens Boots | 4.6% | |
| Intuitive Surgical | 4.5% | |
| Dexcom | 4.4% | |
| Hill-Rom Holdings | 3.8% | |
| top 10 | 52.7% |
BBH – BB Healthcare to benefit from possible Shire takeover