Why Blackstone Spent $2.3B on a drugmaker

on Aug 24, 2020
Updated: Sep 11, 2020
  • Asset manager Blackstone bought the consumer-focused unit of Japan’s Takeda Pharmaceutical.
  • Blackstone is no stranger to investing in Japan.
  • Blackstone said it would be interested in additional similar acquisitions in the country.

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As part of what may seem like a confusing move to some, asset manager Blackstone Group Inc (NYSE: BX) agreed to acquire the consumer health care business of Japan-based Takeda Pharmaceutical for 242 billion yen (£1.75 billion, $2.29 billion), The Wall Street Journal reported.

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Who is Takeda?

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Takeda Pharmaceuticals is a global, research and development-driven pharmaceutical company that mostly focuses on treating metabolic disorders, gastroenterology, neurology, inflammation, and oncology. Recent M&A deals in the pharmaceutical space mostly consisted of one pharmaceutical company acquiring another, or a specific asset.

So when the U.S. asset manager agreed to acquire an Asian pharmaceutical company, some are left wondering the logic behind the deal. But there are multiple reasons why the deal is logical.

First, Blackstone is no stranger to investing in Japan. The company’s real estate investment unit announced earlier this year a sizable bet in the Asian company. Specifically, the asset manager acquired a portfolio of more than 200 apartment buildings, the majority of which are in major cities Tokyo and Osaka.

Second, Takeda was a motivated seller as it had already planned to divest $10 billion worth of assets to help pay down debt it incurred as part of the $58 billion acquisition of Shire last year. 

Third, the business sells popular products, including energy tablets that generated more the equivalent of £0.43 billion during its fiscal year ended March 2020.

Blackstone’s strategy

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Blackstone’s head of private equity for Japan, Atsuhiko Sakamoto, will invest in its newly acquired property to help lift the market share of existing products, per WSJ. The company also plans to introduce new products to the market and ultimately expand across Asia.

Blackstone is likely eyeing the aging Japanese population and looking to profit from companies that strive to lower medical costs. According to a 2019 Bloomberg report, Japan has an aging population problem and its birth rate is well short of what is needed to make up for a surge in retirements.

Blackstone will eventually list the Takeda business on the Tokyo exchange when it is able to show investors a convincing growth profile.

Finally, rival Japanese drugmakers may also look to similarly divest their over-the-counter businesses and Blackstone would be interested in acquiring more properties. The COVID-19 pandemic could force some companies to divest their non-core assets to better focus on new investment opportunities associated with the novel coronavirus.

Perhaps Blackstone has a long term strategy of generating notable economies of scale and creating a long-term health care empire in Asia. 

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