Sri Lanka stocks at 1-week high

Updated 12 July 2013
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Sri Lanka stocks at 1-week high

COLOMBO: Sri Lankan stock market hit a one-week high, led by market heavyweight John Keells Holdings after it said it plans to build a multi-million dollar luxury resort.
The main share index rose 0.77 percent, or 46.33 points, to 6062.38, the highest close since July 4.
Keells, Sri Lanka’s biggest conglomerate, said late on Wednesday it had submitted a plan to the government to build the luxury resort worth more than $650 million that would include hotels, shops and apartments.
Two hours after the trading started, Investment Promotion Minister Lakshman Yapa Abeywardena said Keells had been given approval for a $850 million deal to build the resort.
Shares in Keells ended 2.61 percent higher at 252 rupees.
“Keels deal gave a boost to the market. It’s a positive news that the market was awaiting and market is up on Keells in thin trade,” a stockbroker said.
Capital Alliance Research said in a note the Keells disclosure to the bourse lacks detail as it was not clear whether the deal has secured a casino license or joint venture partner and the structure of the deal.
“If the mixed development does not have a casino, the development is likely to be value destructive,” Capital Alliance said.
The index hit a near 10-week low on Tuesday due to concerns over rupee’s weakening trend and possible foreign outflows.
Foreign investors were net buyers of 6.95 million rupees ($ 53,100) worth of shares on Thursday and they have been net buyers of 15.75 billion rupees in stocks in 2013.
Turnover on Thursday was 241.8 million rupees, well below this year’s daily average of about 1 billion rupees.
Stockbrokers said concern over the further weakening of the rupee has dented investor sentiment, with many investors waiting for clear directions on the currency.
The Sri Lankan rupee spot ended flat at 130.60 per dollar at a near eight-month low, but currency dealers said spot-next eased on exporter dollar conversions.
Currency dealers said none of the banks were trading spot after the central bank, through state banks, guided the market to hold the rupee at 130.60 rupees.
The spot next which traded high of 131.10 during the day due to the importer dollar demand closed at 130.90/131.00 per dollar from Wednesday’s close of 131.00/10.


Market unsure over Shire's backing of $64 billion Takeda bid

Updated 25 April 2018
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Market unsure over Shire's backing of $64 billion Takeda bid

  • Takeda shares fell 7 percent on news of possible deal.
  • Combined company would have its primary listing in Tokyo and also offer American Depository Receipts

Rare disease specialist Shire has announced it was willing to recommend a sweetened $64 billion offer from Japan’s Takeda Pharmaceutical Co. to shareholders, in what would be the biggest acquisition of a drug company this year.
But shares in Takeda extended recent losses, tumbling 7 percent as investors fretted over its ability to buy a company twice its size, raising doubts about whether Shire shareholders will accept a bid that is 56 percent in new Takeda shares.
The stock slide — 18 percent since the news of a possible bid broke — makes the cash-and-share deal less appealing to Shire shareholders, some of whom may be reluctant or unable to hold Takeda shares.
“While this offer represents a solid improvement over Takeda’s third bid (38 percent cash), we still wonder if it is enough to satisfy Shire shareholders,” said Jefferies analyst David Steinberg.
Shire shares slipped 0.8 percent to 39 pounds by 0850 GMT, well below Takeda’s 49 pounds offer, signalling skepticism about the deal as Takeda’s falling stock price erodes the bid’s $64 billion headline value.
Without a deal, Shire shares could fall back to mid-March levels of 30-32 pounds, pressuring management to find other ways to realize value. Prior to Takeda’s approach, Shire was already considering divestments and a split in its operations.
It is now four weeks since Takeda first revealed it was considering a bid and the absence of firm interest from rivals means investors see only a low chance of an interloper emerging.
The latest development, first reported by Reuters, comes after London-listed Shire rejected four previous offers from Takeda.
The fifth offer is worth 49.01 pounds per share, comprised of 27.26 pounds per share in new Takeda shares and 21.75 pounds per share in cash. That represents a 4.3 percent premium to Takeda’s fourth proposal on April 20 and an 11.4 percent premium to its first approach on March 29.
Shire, a member of Britain’s benchmark FTSE 100 stock index, said its board agreed to extend a Wednesday regulatory deadline to May 8 so Takeda can conduct more due diligence and firm up its bid. Shire added the deadline may be extended further if needed.
Any deal is subject to the resolution of several issues, including completion of due diligence by Shire on Takeda, the Dublin-based company said.
A deal would significantly boost Takeda’s position in gastrointestinal disorders, neuroscience, and rare diseases, including a blockbuster haemophilia franchise.
If successful, it would be the largest overseas acquisition by a Japanese company and propel Takeda, led by Frenchman Christophe Weber, into the top ranks of global drugmakers.
Weber, who became Takeda’s first non-Japanese CEO in 2015, has said publicly it was looking for acquisitions to reduce its exposure to a mature Japanese pharmaceutical market.

FINANCIAL STRETCH
The combined company would have its primary listing in Tokyo and also offer American Depository Receipts — a move that would give Shire investors an opportunity to cash out more easily.
But the transaction would be a huge financial stretch, and Takeda investors have been skeptical about the merits of a Shire deal, given the size of the potential purchase and concerns that a large share issue will be needed to fund it.
Moody’s said the deal would pile up debt and hit Takeda’s credit ratings. “This huge acquisition bodes a spike in leverage that could result in a multi-notch downgrade,” said analyst Yukiko Asanuma.
Ambitious cost cutting is also seen as necessary to make the deal pay, and the uncertainties facing an enlarged group would spell a big change in the investment case for holding Takeda.
“Takeda’s shares have been valued for their stability and relatively high dividend,” said Daiwa Securities analyst Kazuaki Hashiguchi, adding this made them attractive even to investors without specialist knowledge of the drug sector.
Takeda, now worth $33 billion by market value, had 466.5 billion yen ($4.3 billion) in cash and short-term investments as of the end of December. It said yesterday it intended to maintain its dividend policy and investment-grade credit rating following the deal.
Dealmaking has surged in the drug industry this year as large players look to improve their pipelines. A Takeda-Shire transaction would be by far the biggest.
Shire has long been seen as a likely takeover target.
Botox-maker Allergan Plc said last week it was considering making a rival offer, only to scrap it hours later due to pushback from shareholders. Shire was also nearly bought by US drugmaker AbbVie Inc. in 2014, until US tax rule changes caused the deal to fall apart.
Shire traces its roots back to 1986, when it began as a seller of calcium supplements to treat osteoporosis, operating from an office above a shop in Hampshire, southern England. Since then, it has grown rapidly through acquisitions to generate revenues of about $15.2 billion last year.
But it has been under pressure in the past 12 months due to greater competition from generic drugs and debt from its $32 billion acquisition of Baxalta in 2016, a widely criticized deal.
It announced last week a sale of its oncology business to unlisted French drugmaker Servier for $2.4 billion.