US hedge fund wants break-up of €35bn Shire

By Mark Kleinman, City Editor
A US hedge fund is demanding a string of divestments at the FTSE-100 biotech group Shire, underlining growing interest among activist investors in large European companies.
Sky News has learnt that Sachem Head Capital Management is urging the board of Shire, which specialises in treatments for rare diseases and neuroscience products, to explore a sale or spin-off of several of its assets.
The move, which has been raised during discussions between the hedge fund and Shire directors in recent months, comes after Sachem Head disclosed during the summer that it had acquired a small stake in the pharmaceuticals group.Sachem Head's call for Shire to assess the merits of a separation of some of its divisions has not yet resulted in a formal letter to the company's board, according to a person close to the situation.Shire, which spent $32bn last year on a takeover of Baxalta, a US-based rival, has begun to face pressure from investors because of its weak share price performance since that deal.The company's shares have slid by more than a quarter during the last year, leaving it with a market value of just under €35bn at Friday's close.Flemming Ornskov, Shire's chief executive, has already signalled that he is weighing a plan to spin off its neuroscience division, which makes products designed to treat attention deficit hyperactivity disorder (ADHD).In August, Mr Ornskov said a decision about the move would be made by the end of the year, with investors including Sachem Head said to be pushing for faster and more radical action.The Shire chief has expressed bemusement at the company's share price performance, telling the Financial Times in July that the Baxalta deal had gone "better than I anticipated" and trumpeting progress towards achieving $700m in promised cost savings.
Shire is based in Dublin but listed in London, and has itself been the target of repeated takeover interest in the last few years.Sources said that Sachem Head, which is an experienced biotech sector investor with holdings in companies such as Celgene and Allergan, acknowledged the complexity of a full break-up of Shire but was keen for its board to explore a broader range of corporate actions to improve its valuation.Sachem Head was founded by Scott Ferguson, a protege of Bill Ackman, one of the pioneers of activist investing in the US.Companies such as Smith & Nephew, French Connection and Rolls Royce have all been targeted by activists in recent months as the trend for more aggressive pressure on boards becomes a more common phenomenon in British boardrooms.A Shire spokesman said: "As a matter of company policy, we do not comment on market rumours or speculation."Shire has a long history of open and active engagement with its shareholders and carefully listens to ideas about enhancing value for all shareholders."Sachem Head declined to comment this weekend.
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