Ranbaxy family sells stake to Daiichi

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Ranbaxy family sells stake to Daiichi

BS Reporter / New Delhi June 12, 2008, 0:21 IST

The Indian promoters of Ranbaxy, the Singh family, have agreed to sell their stake to Daiichi Sankyo Company Ltd of Japan in one of the largest deals in the Indian pharmaceutical space.

The all-cash deal is valued at $4.6 billion (Rs 19,780 crore) which will see Daiichi acquiring 51 per cent in Ranbaxy, India's largest domestic drug company, at Rs 737 a share, a 53.5 per cent premium to the average daily closing price on the National Stock Exchange for three months ending June 10, 2008, and 31.4 per cent to the June 10 closing price.

This price puts Ranbaxy's enterprise value at $8.5 billion.

The Singh family will divest its 34.8 per cent stake and the rest will come through a combination of a preferential equity allotment plus the mandatory open offer for up to 20 per cent of Ranbaxy's shares. Ranbaxy CEO Malvinder Singh will continue to lead the company as CEO and managing director and will also chair the board. The acquisition is expected to be completed by the end of March 2009.

"This deal reflects the future direction of the Indian pharmaceutical industry," Malvinder Singh told reporters."This is a significant milestone in our mission of becoming a research-based international pharmaceutical company," he added.

Daiichi is known to be planning to promote Ranbaxy as an independent generic arm of the company. "Ranbaxy will become the top generic company in Japan in a few years," Singh said.

He added that the acquisition would also help the company clear its debts (including $400 million of foreign currency convertible bonds) and use the surplus funds of approximately Rs 3,000 crore for acquisitions in the generic space within India, Japan and other geographies. The deal provides instant market access to over 60 countries through Ranbaxy's marketing network. Daiichi is present in 21 countries.

"The deal has provided us an excellent opportunity to enter emerging markets like India. Daiichi will leverage Ranbaxy's marketing strengths," Daiichi's President and CEO Takashi Shoda said.

Credit rating agency Crisil today placed Ranbaxy Laboratories' Rs 500 crore debt on rating watch with developing implications after Daiichi-Sankyo agreed to buy the founders' stake in the drug company. Crisil will review its outstanding ratings after evaluating the impact on the credit profile of the company, the agency said in a release.

Meanwhile, Ranbaxy has abandoned plans to hive off its new drug research and development operations into a listed company as the deal includes "the entire assets of Ranbaxy".

Singh said that the collaborative research agreements Ranbaxy has with global drug majors like GlaxoSmithKline (GSK) will continue even after the acquisition as Ranbaxy will continue to function as an independent identity.

"The deal is a win-win situation for Ranbaxy and Daiichi, as the latter can leverage the low-cost advantage offered by India complemented by world-class infrastructure, while Ranbaxy would benefit from the Daiichi's product pipeline," said Sarabjit Kaur Nagra, VP Research, Angel Broking.

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		Discussion Board / User Comments

June 12 , 2008 ,10:19 IST

Ranbaxy after deal As deal passes promoters open up new options .they can invest the bounty in Religare , Max New York Life Insurance , consolidate it to global financial leader .Another opportunity opens up in real estate and SEZ .Or they can enter into tie up with mittal regarding bhatindabs oil refinery.Still they can model their business on vodaphone-essar style , brings in max market capitalization, shareholders wealth .Or I can be appointed as an advisor to promoter .

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