* Takeda to pay 9.6 billion euros for unlisted Nycomed
* Expands reach in Europe, emerging markets
* Gains new lung drug and stable increase in cashflow
* Second largest overseas deal by a Japanese firm
* Pay-day for private equity firms led by Nordic Capital
(Adds Nycomed & Nordic Capital interviews, valuation details)
TOKYO/LONDON, May 19 (Reuters) - Japan's largest drugmaker Takeda Pharmaceutical (4502.T) is buying privately held Nycomed for 9.6 billion euros ($13.7 billion), boosting its presence in emerging markets and adding a newly approved lung-disease drug.
The agreed deal is the biggest overseas purchase by a Japanese company since Japan Tobacco (2914.T) paid $19 billion for Britain's Gallaher, and is Takeda's second major buy after its $8.8 billion deal for Millennium Pharmaceuticals in 2008.
The acquisition gives Takeda, a mainly Asian- and U.S.-focused maker of drugs, a new treatment for "smoker's lung" called Daxas and a portfolio of over-the-counter products.
Swiss-based Nycomed will help Takeda expand in Europe and emerging markets, providing an immediate source of stable cashflow at a time when its top-selling diabetes drug Actos faces the upcoming expiry of its U.S. patent.
"We have a strong European backbone and, even more importantly, a very strong and rapidly growing emerging markets presence -- that, I think, was the key," Nycomed Chief Executive Hakan Bjorklund told Reuters.
Emerging markets are set to become the main driver for the global pharmaceuticals industry as patents run out on many top drugs and sales in Western markets stall. [ID:nN18239660]
"In the long-term, this is a strategic fit. The question of how to strengthen their presence in emerging markets is one that all major drug firms face," said Atsushi Seki, pharmaceuticals analyst at Barclays Capital.
"But in terms of Takeda's goal to return to last year's earnings level by the year ending March 2016, I don't think this deal quite gets them to the point where they are filling in the gap left by Actos' patent expiry."
Nycomed is well-placed in Russia and Brazil and last year bought a majority stake in a Chinese firm. Emerging markets made up nearly two-fifths of its revenue in 2010 and should make up 60 percent of sales by 2015.
Breakingviews on Takeda: [ID:nLDE74B0N4]
Related Dealtalk: [ID:nN10147052]
Analysis on pharma in emerging markets: [ID:nLDE6AA1XJ]
Nycomed timeline: [ID:nLDE74B1NV]
PAY-DAY FOR PRIVATE EQUITY
The deal allows Nycomed's owners to sell their entire stake now, instead of facing a long wait for a flotation where they would initially have to retain significant stakes. A listing had long been mooted by Nycomed management but it was unlikely to have occurred before 2012.
Nycomed is majority owned by four private equity firms, led by Nordic Capital with a 41 percent. Credit Suisse's (CSGN.VX) DLJ Merchant Banking has 25.6 percent, Coller International Partners 9.7 percent and Avista 8.9 percent.
After paying off debt, the shareholders will pocket some 6 billion euros.
Bjorklund said returns would vary between different firms and even between different funds, but his investors were "very satisfied" with the money made on the deal.
Takeda is paying 3.4 times 2010 sales -- excluding a U.S. dermatology business, which accounts for 10 percent of turnover and is not included -- and 12.5 times adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).
That compares to 2.13 and 5.86 times sales and EBITDA paid by Teva TEVA.O for Cephalon CEPH.O, and 2.28 and 8.27 paid by Pfizer (PFE.N) for King, according to Thomson Reuters data.
Takeda's cash payment is inclusive of Nycomed's net debt, which stood at 3.6 billion euros at end-2010, and it will be financed in part with a 600-700 billion yen ($7.3-$8.5 billion) loan. The deal had been expected after being flagged by sources last week. [ID:nL3E7GC04J]
Nordic Capital managing partner Kristoffer Melinder said in a telephone interview that the shareholders had no immediate plans to sell the U.S. dermatology business.
OTHER DEALS POSSIBLE
The deal lifts Takeda's global ranking to No. 12 from No. 16 and Chief Executive Yasuchika Hasegawa said the drugmaker was open to more acquisitions.
"There will be opportunities but it's the same as fishing, you don't know if you will be able get partners just like you don't know if you will be able to bring home fish," he told a news conference.
Barclay's Seki noted Takeda has said it could borrow up to 1 trillion yen and if its funds on hand were added to this, the company still had another 700 billion yen to play with.
Moody's and Standard & Poor's said they might lower their credit ratings on Takeda in view of the Nycomed acquisition.
Takeda said the deal would double European sales, resulting in an increase in annual revenue of more than 30 percent and an increase in annual operating income, excluding special factors derived from the acquisition, of more than 40 percent.
It expects integration to be relatively straightforward, given the limited overlap between the two business, and sees 30 billion yen of cost synergies annually in three years.
HOPES FOR DAXAS
Nycomed's lung drug roflumilast, known as Daxas in Europe and Daliresp in the United States, is the first in a new class of treatment for chronic obstructive pulmonary disease, a common breathing disorder often caused by smoking.
After some delays, it won U.S. approval in March where Forest Laboratories FRX.N has the marketing rights. In Europe, Merck & Co (MRK.N) has marketing rights.
Takeda's shares ended 0.5 percent higher ahead of the statement in a Nikkei benchmark .N225 down 0.4 percent. Despite the size of the Nycomed deal, its shares have fallen only 2 percent since talk of the deal emerged with some analysts noting that Takeda is maintaining an annual dividend of 180 yen.
Takeda has unsuccessfully looked at buying other European drugmakers previously, including Organon and Sweden's Meda AB (MEDAa.ST), according to sources familiar with the matter.
Deutsche Bank was financial adviser to Takeda while Goldman Sachs and Credit Suisse advised Nycomed. ($1 = 0.7010 euros, $1 =81.775 Japanese Yen) (Additional reporting by Edwina Gibbs and Ritsuko Shimizu in Tokyo, and Simon Meads in London; Editing by David Cowell)