Blackstone to Buy Takeda Pharma’s Japanese Consumer Healthcare Business for $2.29 billion; Target Price $60

U.S. investment fund Blackstone Group said on Monday that it will acquire Takeda Pharmaceutical’s Japanese consumer healthcare business for $2.29 billion, marking Blackstone’s second private equity transaction in Japan’s healthcare sector following the acquisition of AYUMI Pharmaceutical last year.

Takeda anticipates a pre-tax gain of about JPY 140.0 billion on the sale of shares of the subsidiary, to be recognized when the transfer of shares is executed and completed. Takeda anticipates Reported Net Profit attributable to owners of the Company to increase by about JPY 105.0 billion.

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. is acting as an exclusive financial advisor to Blackstone, while Simpson Thacher & Bartlett LLP and Anderson Mori & Tomotsune are acting as legal advisors.

Blackstone’s shares closed 0.91% higher at $52.97 on Friday. However, the stock is down about 5% so far this year.

Executives’ comments

“We are privileged to announce this partnership and invest in the company’s plans to become the leading consumer healthcare business in Japan. TCHC is well-positioned to grow its established brands in Japan and launch new and expanded product offerings. We see tremendous potential for TCHC in Japan and throughout Asia, and we are confident that Blackstone’s global network and expertise in the sector can accelerate TCHC’s growth,” said Atsuhiko Sakamoto, Head of Private Equity in Blackstone Japan.

“Throughout decades, TCHC’s brands including Alinamin have earned the trust and confidence of consumers in Japan. We believe the active and strategic investment by Blackstone will enable TCHC to maximize its potential. Blackstone is one of the world’s leading investment firms and has rich experience in the healthcare sector, and we are confident this will help TCHC further develop its products and brands and strengthen the business overall,” said Milano Furuta, Chairman of the Board, Takeda Consumer Healthcare Company.

Blackstone stock forecast

Nine analysts forecast the average price in 12 months at $61.88 with a high forecast of $65.00 and a low forecast of $54.00. The average price target represents a 16.82% increase from the last price of $52.97. From those nine analysts, five rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $65 with a high of $100 under a bull-case scenario and $20 under the worst-case scenario. Blackstone Group had its price target lowered by UBS to $63 from $65

Other equity analysts also recently updated their stock outlook. Deutsche Bank raised the price target to $54 from $49, Citigroup upped their price target to $58 from $57, JP Morgan increased their price target to $58 from $54 and Credit Suisse raised to $65 from $64.

We think it is good to hold for now as 50-day Moving Average and 100-200-day MACD Oscillator signals a mild selling opportunity.

Analyst view

“Best-in-class private markets franchise with significant brand power, $156 billion of dry powder and strong mgmt company balance sheet uniquely position Blackstone to capitalize on a challenging recession backdrop and drive above peer growth,” said Courtney Yakavonis, equity analyst at Morgan Stanley.

“Fundraising machine that should raise over $211 billion in 2020-21, supported by newer initiatives (i.e., Infrastructure, Core+ RE, Tac Opps, Secondaries, longer-dated PE, Asian PE etc.) and existing strategies. We view Blackstone as best positioned for the secular growth story in alternatives given their leading businesses in every major category that should command a premium multiple,” he added.

Upside and Downside risks

Upside: 1) Ramping cash performance fees in newer funds/strategies incl: BCP VI, VII, Tac-Opps, BREP VIII. 2) Growth in Fee-Related Earnings from fee activation of newly raised funds. 3) Faster penetration of retail channel – highlighted by Morgan Stanley.

Downside: 1) Deeper recession that delays harvesting of investments and dampens returns which lowers cash earnings. 2) Regulatory risk: Increased political and regulatory scrutiny of the private equity business model.