Japan's Daiichi to buy majority stake in India's Ranbaxy for $4.6 bn
New Delhi, June 11, 2008 (IANS)

Japanese drugs major Daiichi Sankyo Wednesday said they will pay $4.6 billion in cash to buy majority stake in Ranbaxy Laboratories, India's largest pharmaceutical firm with global revenues of $1.6 billion, including the entire 34.8 %equity held by its promoters. The mega deal - the largest in India's $7.3 billion pharmaceutical industry - is estimated to value Ranbaxy at $8.9 billion and catapult the combined entity as the world's 15th biggest drugs maker from the current 22nd position.

The promoters of the group, led by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, hold a 34.8% stake and will get Rs.95.76 billion ($2.4 billion) for their stake. Along with open offer for 20% stake, which Daiichi Sankyo will make soon, the Japanese company will spend an estimated $4.6 billion for the controlling stake.

Following the deal, expected to conclude by March 2009, Ranbaxy will become a subsidiary of Daiichi Sankyo but continue to list on Indian bourses. "For me and the promoters of Ranbaxy Laboratories, this is certainly a very emotional decision," the company's managing director Malvinder Singh told a press conference here, confirming the deal with Daiichi.

"This is indeed a historic date not just for the two companies but also for the future direction of the global pharmaceuticals industry," he told reporters at the Shangri La hotel here. In addition to his present responsibilities as chief executive and managing director of Ranbaxy Laboratories, he will also be the company's chairman, Malvinder Singh added.

As the news on the deal started emerging Wednesday morning, the equity shares of Ranbaxy first dipped a bit but soon moved up by 5 percent on the Bombay Stock Exchange (BSE) to a 52-week high of Rs.592.70.

"From Ranbaxy’s point of view, an exit option makes sense for the promoters to sell to a well reputed and established company such as Daiichi Sankyo," said Shivani Shukla Raval, industry manager for healthcare practice with global consultancy Frost and Sullivan.

"Together with the combined resource pool, the company would be a strong contender in both the generic as well as innovator space. And it would enable Ranbaxy to be a truly research based pharmaceutical Company."

Under the deal reached Wednesday, Daiichi Sankyo will pay Ranbaxy promoters at least Rs.737 per share for the entire 34.8 percent stake, and also make an open offer for a further acquisition of 20% at the same price. Ranbaxy will also make a preferential equity offer to the Japanese company for 9.5% of the equity at Rs.737 and issue warrants for 4.9% that can be converted into equity at a later date.

The offer price of Rs.737 represents a premium of 53.5 percent over the average price of the Ranbaxy scrip for three months ended June 10 and 31.4 percent over the price as on that date.

"This is a path-breaking deal and redefines India's pharmaceutical landscape," Malvinder Singh said, after successfully negotiating the deal with Daiichi, which has a Indian subsidiary Daiichi Sankyo India Pharma, based out of Mumbai. "Together with our pool of scientific, technical and managerial resources, we will now enter into a new orbit to chart a higher trajectory of sustainable growth in the medium and long term,” he added.

Daiichi Sankyo president Takashi Shoda said the deal was part of the group's strategy to become a global company and complement their presence in original drugs with the fast-growing non-proprietary pharmaceuticals. “This complementary combination represents a perfect strategic fit and delivers a considerable opportunity for the future growth of the new Daiichi Sankyo group,” he added.

Fact sheet on Ranbaxy - India's largest drugs maker

• Founder: Late Bhai Mohan Singh
• Incorporation: 1961 (public issue in 1973)
• Initiator of globalisation: Late Parvinder Singh (son of founder)
• Managing director and chief executive: Malvinder Mohan Singh (son of Parvinder Singh)
• Non-executive chairman: Harpal Singh
• Turnover: $1.62 billion in 2007
• Domestic sales: $301 million in 2007
• Largest market: North America, contributing 26% of sales
• Positioning in India: Largest drugs maker in $7.3 billion industry
• Global positioning: Ranked among top 10 global generic drug companies
• Global footprint: Presence in 23 of the top 25 global drugs markets
• Manufacturing: Facilities in 11 countries
• Subsidiaries: Fortis Healthcare, Religare, Ranbaxy Pharmaceuticals
• Areas of strength: Generic, out-of-patent, drugs
• New initiatives: Oncology, Peptides and Limuses
• Current stock price: Rs.592 per share (face vale Rs.5)
• Prompters' stake: 34.8 percent (valued at $2.4 billion)
• Valuation after Daiichi Sankyo deal: $8.9 billion
• Low point: Ownership battle between Bhai Mohan Singh and Parvinder Singh in early 1990s
• High points: Acquistion of Terpia of Romania for $324 million; acquisition of Be Tabs of South Africa for $70 million