UPDATE 2-Merits of any Takeda bid for Shire questioned, shares slide

* Takeda mulling a bid for Shire

* Investors worry about damage to Takeda finances, dilution

* Takeda shares sink 7 pct, Shire's surged 16 pct (Recasts and adds analysts' comments)

TOKYO, March 29 (Reuters) - A potential acquisition of London-listed Shire by Takeda Pharmaceutical was greeted with investor scepticism about it merits on Thursday, with shares in the Japanese drug maker tumbling 7 percent.

Takeda, currently worth some $39 billion, is smaller than Shire, a rare disease specialist which saw its stock jump 16 percent to be valued at some $45 billion after the Japanese firm said it was in a "preliminary and exploratory stage" of considering a bid.

That similarity in size had raised the question whether the damage to Takeda's finances would be worth the boost to its portfolio and pipeline.

"The impression left by the news is that the acquisition would be an overreach," said Mizuho Securities analyst Hiroshi Tanaka in a note to clients.

Any deal is expected to involve some form of equity, whether that be a share swap or a share issue, analysts also said, noting a share issue could be highly dilutive for Takeda shareholders.

Takeda said an acquisition of Shire, which also sells treatments for attention deficit disorder, could create a global biopharmaceutical leader, boost its position in the United States and in the fields of oncology, gastrointestinal diseases and neuroscience.

But some analysts also doubted whether Shire's treatments for haemophilia and other rare diseases would benefit Takeda and thought that any deal should be more targeted.

"We think neuroscience assets alone, which Shire said are under strategic review, would be a realistic target, but we find it hard to imagine Takeda acquiring all of Shire," said UBS analyst Atsushi Seki.

"We think the possibility of it making a proposal is very low, but its share price will likely be under pressure from concern over potential dilution."

Takeda's potential bid for Shire, most of whose employees are based in North America, immediately stoked expectations for another takeover battle in the deal-hungry pharma industry.

In recent months, France's Sanofi agreed to buy U.S haemophilia specialist Bioverativ for $11.6 billion and Belgium's Ablynx for 3.9 billion euros ($4.8 billion). Before that, U.S.-based Celgene bought cancer specialist Juno Therapeutics.

Japanese companies, faced with a rapidly shrinking population, are seen as particularly acquisitive. Takeda, founded in 1781 as a purveyor of traditional herbal medicine, has sought to internationalise through deals under its French CEO Christophe Weber, who took over in 2015.

($1 = 0.8125 euros) (Reporting by Ritsuko Ando and Minami Funakoshi; Editing by Edwina Gibbs)