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June 11, 2008
Japan's Daiichi to Buy Majority Stake
in India's Ranbaxy for $4.6 bn
New Delhi
Japanese drugs major Daiichi Sankyo Wednesday said 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 percent 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-percent stake and will get
Rs.95.76 billion ($2.4 billion) for their stake. Along with open
offer for 20 percent 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
percent at the same price.
Ranbaxy will also make a preferential equity offer to the Japanese
company for 9.5 percent of the equity at Rs.737 and issue warrants
for 4.9 percent 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.
IANS
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June 11, 2008
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