Singh brothers count on disclosure to counter Daiichi claims

Daiichi had bought 35% stake in Ranbaxy from its previous promoters, Malvinder Mohan Singh, his brother Shivinder Mohan Singh and family

Facing arbitration claims here by Daiichi Sankyo, Ranbaxy's former Indian promoters are counting on 'representations and warranties' made in the share purchase agreement signed with the Indian drugmaker's current Japanese owners in 2008.

 

Daiichi had bought nearly 35% controlling stake in Ranbaxy from its previous promoters, Malvinder Mohan Singh, his brother Shivinder Mohan Singh and family, for about $2.4 billion and the share purchase agreement (SPA) was signed on June 11, 2008.

 

Over five years after the deal, Daiichi is now seeking damages from Ranbaxy's erstwhile owners for losses arising from a USD 500-million settlement that Ranbaxy had to sign with the US authorities over charges that the company had violated norms to get regulatory approval for its medicines.

 

When asked about the arbitration proceedings, Daiichi declined to comment and said they do not have any further comments to offer beyond its statement on May 22, 2013.

 

At that time, Daiichi had said it "believes certain former

 

shareholders of Ranbaxy concealed and misrepresented critical information concerning the US Department of Justice and the FDA investigations. Currently, Daiichi Sankyo is pursuing available legal remedies and cannot comment further on the subject at this time."

 

While the erstwhile promoters also declined to comment as the matter is under arbitration, sources said they are countering claims against them on grounds that Ranbaxy had made proper public disclosures about all ongoing regulatory issues and investigations before signing of the deal in 2008.

 

Besides, they are also banking on the 'representations and warranties' made in the SPA to safeguard their case in the arbitration process and claim that the SPA insulates them from any such damages.

 

In such a scenario, sources said, the focus may shift towards possibly poor due-diligence for the deal and weak representations and warranties made in the SPA.

 

As per sources, the arbitration needs to be completed by the next quarter, as the SPA requires any arbitral award to be rendered within six months from commencement of the arbitration, unless extended by the arbitral tribunal for a period of maximum six months.

 

While Ranbaxy continues to face regulatory problems in the US over its products and facilities, it had issued a press release on February 15, 2007 -- more than a year before the Daiichi deal -- stating that federal officials had conducted a search at its New Jersey offices in the US. The company had said it was not aware of any wrongdoings and it was fully cooperating with the officials.

 

In its annual report for the year ended December 31, 2007 also Ranbaxy had mentioned investigations being carried out by the US Federal officials.