Description
Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.
ACCOUNTING REPORT ON MERGER AND ACQUISITION : DAIICHI SANKYO COMPANY LTD.
BACKGROUND OF DAIICHI SANKYO, JAPAN DAIICHI SANKYO CO., LTD. WAS ESTABLISHED IN 2005 WITH THE MERGER OF TWO LEADING CENTURY -OLD PHARMACEUTICAL COMPANIES , D AIICHI PHARMACEUTICAL CO .,L TD. AND SANKYO CO., LTD . DAIICHI SANKYO MAINTAINS A PORTFOLIO OF MARKETED PHARMACEUTICALS FOR HYPERTENSION, HYPERLIPIDAEMIA , AND BACTERIAL INFECTIONS
AROUND THE WORLD AND ALSO FOCUSES ON THE DISCOVERY OF NOVEL ONCOLOGY THERAPIES .
HEADQUARTERED IN TOKYO, THE COMPANY IS DEDICATED TO THE CREATION AND SUPPLY OF INNOVATIVE PHARMACEUTICAL PRODUCTS TO ADDRESS THE DIVERSIFIED, UNMET MEDICAL NEEDS OF PATIENTS IN BOTH MATURE AND EMERGING MARKET. DAIICHI SANKYO, INC. (DSI) BEGAN OPERATING IN THE U.S. IN 2006. IT IS THE U.S. SUBSIDIARY OF DAIICHI SANKYO, COMPANY, LTD. AND A MEMBER OF THE D AIICHI SANKYO GROUP. THE ORGANIZATION , WHICH INCLUDES U.S. COMMERCIAL OPERATIONS AND GLOBAL CLINICAL DEVELOPMENT (D AIICHI S ANKYO PHARMA D EVELOPMENT ), IS HEADQUARTERED IN NEW JERSEY . HISTORY: ? IN 2000-SANKYO PHARMA ESTABLISHES INDEPENDENT OPERATIONS IN THE U .S ? IN 2001 SANKYO BUYS OUT SANKYOPARKE-DAVIS, COMBINING ALL U.S. COMMERCIAL OPERATIONS , RESEARCH AND DEVELOPMENT INTO ONE ORGANIZATION , SANKYOPHARMA INC. ? IN 2004 -DAIICHI ESTABLISHES DAIICHI MEDICAL RESEARCH, INC. IN THE U.S. ? IN 2005 -DAIICHI AND SANKYO ANNOUNCE THEIR AGREEMENT TO MERGE , ESTABLISHING DAIICHISANKYO , COMPANY , LTD. IN JAPAN . ? 2006-DAIICHI PHARMACEUTICAL CO., LTD. A ND SANKYO CO ., LTD. INTEGRATE TO FORM DAIICHISANKYO , I NC . ? IN MARCH 2007-DAIICHI SANKYO INDIA PHARMA PRIVATE LIMITED (DSIN) WAS ESTABLISHED IN M UMBAI FACTS: ? JAPAN BASED PHARMACEUTICAL COMPANY. ? ESTABLISHED IN2005 - MERGER OF ? SANKYO CO., LTD. AND DAIICHI PHARMACEUTICAL CO., LTD
? HEAD OFFICE TOKYO ? LEADING COMPANY IN THE FIELD OF CARDIOVASCULAR DRUGS . ? WORKFORCE -29,272 PEOPLE (AS OF SEPTEMBER 30, 2009) CAPITAL -50 BILLION
YEN
? U.S. SUBSIDIARY , DAIICHI SANKYO, INC. (DSI) ? EUROPEAN SUBSIDIARY , DAIICHI SANKYO EUROPE ? GMBH (DSE)
RANBAXY LABORATORIES LIMITED
BACKGROUND:
RANBAXY LIMITED (RANBAXY), INDIA'S LARGEST PHARMACEUTICAL COMPANY , IS AN INTEGRATED , RESEARCH BASED , INTERNATIONAL PHARMACEUTICAL COMPANY , PRODUCING A WIDE RANGE OF QUALITY , AFFORDABLE GENERIC MEDICINES , TRUSTED BY HEALTHCARE PROFESSIONALS AND PATIENTS ACROSS GEOGRAPHIES . RANBAXY TODAY HAS A PRESENCE IN 23 OF THE TOP 25 PHARMACEUTICAL MARKETS OF THE WORLD . THE COMPANY HAS A GLOBAL FOOTPRINT IN 46 COUNTRIES , WORLD-CLASS MANUFACTURING FACILITIES IN 7 COUNTRIES AND SERVES CUSTOMERS IN OVER 125 COUNTRIES . IT WAS INCORPORATED IN 1961 BY SINGH'S GRANDFATHER BHAI MOHAN SINGH, FURTHER HIS SON D R.PARVINDER S INGH SUCCEEDED IT , TRANSFORMING RANBAXY INTO INDIA’S FIRST MULTINATIONAL DRUG FIRM . ? ? ? ? IT WENT PUBLIC IN 1973. 1990 RANBAXY GRANTED US PATENT FOR DOXYCYCLINE. 1992 ENTERED INTO AN AGREEMENT WITH ELI LILLY & CO. OF USA FOR SETTING UP A JOINT VENTURE IN I NDIA TO M ARKET S ELECT LILLY PRODUCTS . RANKED 8 TH AMONGST THE GLOBAL GENERIC PHARMACEUTICAL COMPANIES , ITS
STATED VISION HAS BEEN TO BE AMONG THE TOP FIVE GLOBAL GENERIC PLAYERS
LABORATORIES
? ?
$5 BILLION BY 2012. IT HAS 12,000 EMPLOYEES , INCLUDING 1,200 SCIENTISTS MR. ATULSOBTI IS THE PRESENT CEO & MD OF RANBAXY LABORATORIES .
AND TO ACHIEVE GLOBAL SALES OF
FACTS: ? ? ? ? ? INDIA’S LARGEST PHARMACEUTICAL COMPANY . INCORPORATED IN 1961 ATULSOBTI IS CURRENTLY RANBAXY CEO AND MANAGING DIRECTOR PRESENT CHAIRMAN- TSUTOMU UNE EXPORTS ITS PRODUCTS TO 125 COUNTRIES
? GROUND OPERATIONS IN 46 COUNTRIES ? MANUFACTURING FACILITIES IN 7 COUNTRIES . ? HQ: GURGAON, HARYANA.
HISTORY: ? STARTED BY RANBIR SINGH AND GURBAX SINGH IN 1937. ? IN 1998, RANBAXY ENTERED THE UNITED STATES MARKET ? JAPANESE COMPANY DAIICHI SANKYO GAINED MAJORITY CONTROL IN 2008 FINANCIALS: 2008-GLOBAL SALES OF US $ 1,682 MILLION GROWTH OF 4%. NORTH AMERICA , THE COMPANY'S LARGEST MARKET CONTRIBUTED SALES OF US $ 449MILLION INDIA CLOCKING SALES OF AROUND US $ 300MILLION MARKET SHARE IN INDIA IS 5%
o o o o o
MAJOR SET BACK : DECEMBER 2005, RANBAXY'S SHARES HIT HARD BY A PATENT RULING DISALLOWING PRODUCTION OF ITS OWN VERSION OF PFIZER ’S DRUG LIPITOR S EPTEMBER 2008, THE FDA ISSUED TWO WARNING LETTERS TO RANBAXY AND AN IMPORT ALERT FOR GENERIC DRUGS PRODUCED BY TWO MANUFACTURING PLANTS IN I NDIA.
RANBAXY-DAIICHI SANKYO DEAL
? ON 12TH JUNE 2008, RANBAXY ENTERED INTO AN ALLIANCE WITH ONE OF THE LARGEST JAPANESE INNOVATOR COMPANIES , DAIICHI SANKYO COMPANY L TD., TO CREATE AN
INNOVATOR AND GENERIC PHARMACEUTICAL POWERHOUSE . SIGNED AN AGREEMENT TO ACQUIRE PROMOTERS .
DAIICHI SANKYO CO. LTD .
34.8% OF RANBAXY LABORATORIES LTD. FROM ITS
?
DAIICHI SANKYO EXPECTS TO INCREASE ITS STAKE IN RANBAXY THROUGH VARIOUS MEANS
SUCH AS PREFERENTIAL ALLOTMENT, PUBLIC OFFER AND PREFERENTIAL ISSUE OF
WARRANTS TO ACQUIRE A MAJORITY IN
RANBAXY, I.E. AT LEAST 50.1 %
?
UNDER THE DEAL, DAIICHI SANKYO AGREED TO ACQUIRE 34.8 PER CENT STAKE FOR
AROUND
RS. 10,000 CRORE ($2.4 BILLION) AT RS. 737 ($17) PER SHARE, AT A PREMIUM
OF
31% OVER THE PRICE . (CURRENT PRICE 561 AND DEAL PRICE IS 737) FROM THE MRMALVINDER SINGH AND FAMILY .
PROMOTERS
?
THE JAPANESE COMPANY HAS AGREED TO ACQUIRE 34.81 PER CENT OF THE STAKE OF THE
COMPANY ,
THE COMPANY WILL ALSO MAKE AN OPEN OFFER . THE OPEN OFFER MADE TO THE 20 PER CENT AT RS 737 A SHARE THAT DAIICHI SANKYO’S STAKE IN THE COMPANY TO A MAXIMUM OF 58.09 PER CENT. 4.5 PER CENT THROUGH SHARE WARRANTS TO BE ISSUED ON
PUBLIC SHAREHOLDERS FOR ACQUIRING ANOTHER INCREASE
?
DAIICHI SANKYO PICK UP ANOTHER 9.5 PER CENT THROUGH PREFERENTIAL ALLOTMENT OF
EQUITY SHARES AND ANOTHER A PREFERENTIAL BASIS .
?
THAT COME INTO PLAY IF THE ORDINARY SHAREHOLDERS DON'T RESPOND TO THE OPEN
OFFER AND
DAIICHI SANKYO NEEDS ANOTHER WAY TO RAISE ITS STAKE TO 51%.
DEAL STRUCTURE:
? DAIICHI SANKYO WILL ALSO BE ISSUED FRESH SHARES AND WARRANTS (46.3 MILLION
SHARES
+ 23.8 MILLION WARRANTS ), WHICH WILL RESULT IN A CASH INFUSION OF ABOUT
RS 50 BILLION (@ RS 737/SHARE). THE FRESH SHARES AND WARRANTS WILL BE ISSUED
AT
RS 737/SHARE OR THE RATE DETERMINED BY SEBI RULES, WHICHEVER IS HIGHER . ITS STAKE WILL GO UP TO ABOUT 59% POST THE OPEN OFFER AND THE WARRANTS WILL BE EXERCISABLE 6-18 MONTHS POST ZENOTECH SHAREHOLDERS
?
DAIICHI WILL HAVE TO MAKE AN OPEN OFFER (ON THE EXPANDED CAPITAL) TO RANBAXY
SHAREHOLDERS . EXERCISE OF WARRANTS .
ALLOTMENT . IT WILL ALSO HAVE TO MAKE AN OPEN OFFER TO IN WHICH
RANBAXY HOLDS SIGNIFICANT STAKE . DAIICHI SANKYO AND CONVERSION OF FCCBS. CEO &
? ?
THE SHAREHOLDING POST THE DEAL WILL GO UP ON ACCOUNT OF THE FRESH SHARES AND
WARRANTS ISSUED TO
AFTER THE ACQUISITION , RANBAXY WILL OPERATE AS DAIICHI SANKYO’S SUBSIDIARY BUT
WILL BE MANAGED INDEPENDENTLY UNDER THE LEADERSHIP OF ITS CURRENT
MANAGING DIRECTOR MALVINDER SINGH. ? THE DEAL MADE DAIICHI -RANBAXY, THE COMBINED ENTITY THE 15TH LARGEST
PHARMACEUTICAL COMPANY IN THE WORLD WITH A MARKET CAPITALIZATION OF AROUND
US$30 BILLION BIGGER THAN TEVA BUT STILL FAR SMALLER THAN THE $48-BILLION PFIZER, THE $44-BILLION GLAXOSMITHKLINE AND $40-BILLION NOVARTIS GROUP . ? IT HELPED DAIICHI LEVERAGE ITS INNOVATIVE DRUG MAKING CAPABILITIES AND R&D
EXPERTISE WITH
RANBAXY’S LOW COST MANUFACTURING ABILITIES TO ACHIEVE A
COMPETITIVE POSITION
IN THE WORLD GENERIC
DRUG MARKETC ONSIDERING THAT
RANBAXY IS A GENERICS COMPANY AND DAIICHI SANKYO AN INNOVATOR COMPANY , BOTH
THE BUSINESSES COMPLEMENT EACH OTHER WITH NEGLIGIBLE OVERLAP .
? ?
RANBAXY CAN PROVIDE A LOW COST MANUFACTURING SET- UP TO DAIICHI SANKYO
THROUGH
RANBAXY , ZENOTECH AND ORCHID.
UNLIKE DAIICHI SANKYO, RANBAXY HAS A GEOGRAPHICALLY DIVERSIFIED PRESENCE
ACROSS
US, EUROPE AND EMERGING MARKETS THUS IT WILL BE ABLE TO PROVIDE A DAIICHI SANKYO' PRODUCT PORTFOLIO , INCLUDING IN INDIA. THIS DEAL WILL HELP RANBAXY TAP THIS
WIDER REACH TO
?
RANBAXY HAS A SMALL PRESENCE IN THE JAPANESE MARKET WHERE THE GENERICS
MARKET HOLDS GOOD OPPORTUNITIES . OPPORTUNITY .
?
RANBAXY IS ESSENTIALLY A GENERICS COMPANY WITH EFFORTS TO BUILD ITS PROPRIETARY
BUSINESS .
DAIICHI SANKYO, WHICH HAS EXPERTISE IN INNOVATIVE R&D WILL SUPPORT
RANBAXY'S R&D EFFORTS AND CONTRACT RESEARCH BUSINESS . ? ? RANBAXY WILL INCUR LOWER INTEREST COSTS , AS IT WILL NOW BECOME A DEBT-FREE
COMPANY .
THE DEAL WITH DAIICHI SANKYO WILL STRENGTHEN THE FINANCIALS OF RANBAXY (MAKING
IT DEBT FREE AND CASH RICH ) AND HELP IT GROW AGGRESSIVELY ORGANICALLY AND THROUGH ACQUISITIONS .
WHY RANBAXY DID IT ?
? ? ? A VERY INTELLIGENT DEAL HAD HELD SHARE FOR 50 YEARS BUT THE RANBAXY GROWTH CURVE HAD PEAKED ? 2006 -16% GROWTH ? 2007 -7% GROWTH ? 2009 - 9% GROWTH FORECAST ? ? ? BUSINESS MODEL WAS STRUGGLING WITH HIGH LITIGATION COSTS AND DEVALUATION OF
THE RUPEE AGAINST THE
USD
US STRATEGY WAS LOOKING IN THE FACE OF MORE EXPENSIVE LITIGATION. SELLING OF ENTIRE STAKE AT 30% PREMIUM
WHY DAICHI DID IT?
? JAPAN HAS AN AGEING POPULATION AND THEY NEEDED NEW MARKET ? THERE IS GROWING RECOGNITION IN J APAN OF THE IMPORTANCE OF GENERIC DRUGS ? JAPANESE HEALTH MINISTRY IS ENCOURAGING DOCTORS TO USE GENERIC DRUGS TO
REDUCE THE HEALTH BUDGET
? ACQUISITION OF RANBAXY GIVES DAIICHI A LOW COST MANUFACTURING BASE IN INDIA ? DAIICHI WILL HAVE A STRONG GENERICS OPERATIONS IN INDIA AND OPERATIONS IN 60
DIFFERENT COUNTRIES
? DAIICHI MOVES FROM 22ND RANK TO 15TH AMONG WORLD LARGEST PHARMACEUTICAL
COMPANIES .
MY OPINION ABOUT THE DEAL DECISION BEFORE MERGER
I. II. DAIICHI SANKYO 25TH LARGEST PHARMACEUTICAL COMPANY IN THE WORLD RANBAXY WAS THE 8 TH LARGEST GENERIC DRUG MAKER IN THE WORLD
AFTER MERGER
I. II. RANBAXY DAIICHI 15TH LARGEST PHARMACEUTICAL COMPANY RANBAXY TO BE AMONG THE TOP FIVE GENERIC DRUG MAKERS IN THE WORLD
COMMON INFLUENCES
? ? ? ? ?
OF MERGER ON BOTH
DAIICHI
AND
RANBAXY
REDUCED COMPETITION & CHOICE FOR CONSUMER IN OLIGOPOLY MARKET LIKELIHOOD OF JOB CUTS CONFLICT WITH NEW MANAGEMENT DIFFICULTY IN CULTURAL INTEGRATION MONETARY COST TO THE COMPANY
DAIICHI SANKYO’S MOVE TO ACQUIRE RANBAXY WILL ENABLE THE COMPANY TO GAIN THE BEST OF BOTH WORLDS WITHOUT INVESTING HEAVILY INTO THE GENERIC BUSINESS .
THE PATENT PERSPECTIVE OF THE MERGER CLEARLY INDICATES THE INTENTIONS OF BOTH
COMPANIES IN FILLING THE RESPECTIVE VOID SPACES OF THE OTHER AND EMERGE AS A GLOBAL LEADER IN THE PHARMACEUTICAL INDUSTRY .
RANBAXY HAS BECOME PART OF A JAPANESE CORPORATE FRAMEWORK, WHICH IS EXTREMELY REPUTED IN THE CORPORATE WORLD . AS A GENERICS PLAYER , RANBAXY IS VERY WELL PLACED IN BOTH INDIA AND ABROAD ALTHOUGH ITS SHARE PERFORMANCE BELIEVES ITS TRUE POTENTIAL .
doc_850407459.docx
Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture.
ACCOUNTING REPORT ON MERGER AND ACQUISITION : DAIICHI SANKYO COMPANY LTD.
BACKGROUND OF DAIICHI SANKYO, JAPAN DAIICHI SANKYO CO., LTD. WAS ESTABLISHED IN 2005 WITH THE MERGER OF TWO LEADING CENTURY -OLD PHARMACEUTICAL COMPANIES , D AIICHI PHARMACEUTICAL CO .,L TD. AND SANKYO CO., LTD . DAIICHI SANKYO MAINTAINS A PORTFOLIO OF MARKETED PHARMACEUTICALS FOR HYPERTENSION, HYPERLIPIDAEMIA , AND BACTERIAL INFECTIONS
AROUND THE WORLD AND ALSO FOCUSES ON THE DISCOVERY OF NOVEL ONCOLOGY THERAPIES .
HEADQUARTERED IN TOKYO, THE COMPANY IS DEDICATED TO THE CREATION AND SUPPLY OF INNOVATIVE PHARMACEUTICAL PRODUCTS TO ADDRESS THE DIVERSIFIED, UNMET MEDICAL NEEDS OF PATIENTS IN BOTH MATURE AND EMERGING MARKET. DAIICHI SANKYO, INC. (DSI) BEGAN OPERATING IN THE U.S. IN 2006. IT IS THE U.S. SUBSIDIARY OF DAIICHI SANKYO, COMPANY, LTD. AND A MEMBER OF THE D AIICHI SANKYO GROUP. THE ORGANIZATION , WHICH INCLUDES U.S. COMMERCIAL OPERATIONS AND GLOBAL CLINICAL DEVELOPMENT (D AIICHI S ANKYO PHARMA D EVELOPMENT ), IS HEADQUARTERED IN NEW JERSEY . HISTORY: ? IN 2000-SANKYO PHARMA ESTABLISHES INDEPENDENT OPERATIONS IN THE U .S ? IN 2001 SANKYO BUYS OUT SANKYOPARKE-DAVIS, COMBINING ALL U.S. COMMERCIAL OPERATIONS , RESEARCH AND DEVELOPMENT INTO ONE ORGANIZATION , SANKYOPHARMA INC. ? IN 2004 -DAIICHI ESTABLISHES DAIICHI MEDICAL RESEARCH, INC. IN THE U.S. ? IN 2005 -DAIICHI AND SANKYO ANNOUNCE THEIR AGREEMENT TO MERGE , ESTABLISHING DAIICHISANKYO , COMPANY , LTD. IN JAPAN . ? 2006-DAIICHI PHARMACEUTICAL CO., LTD. A ND SANKYO CO ., LTD. INTEGRATE TO FORM DAIICHISANKYO , I NC . ? IN MARCH 2007-DAIICHI SANKYO INDIA PHARMA PRIVATE LIMITED (DSIN) WAS ESTABLISHED IN M UMBAI FACTS: ? JAPAN BASED PHARMACEUTICAL COMPANY. ? ESTABLISHED IN2005 - MERGER OF ? SANKYO CO., LTD. AND DAIICHI PHARMACEUTICAL CO., LTD
? HEAD OFFICE TOKYO ? LEADING COMPANY IN THE FIELD OF CARDIOVASCULAR DRUGS . ? WORKFORCE -29,272 PEOPLE (AS OF SEPTEMBER 30, 2009) CAPITAL -50 BILLION
YEN
? U.S. SUBSIDIARY , DAIICHI SANKYO, INC. (DSI) ? EUROPEAN SUBSIDIARY , DAIICHI SANKYO EUROPE ? GMBH (DSE)
RANBAXY LABORATORIES LIMITED
BACKGROUND:
RANBAXY LIMITED (RANBAXY), INDIA'S LARGEST PHARMACEUTICAL COMPANY , IS AN INTEGRATED , RESEARCH BASED , INTERNATIONAL PHARMACEUTICAL COMPANY , PRODUCING A WIDE RANGE OF QUALITY , AFFORDABLE GENERIC MEDICINES , TRUSTED BY HEALTHCARE PROFESSIONALS AND PATIENTS ACROSS GEOGRAPHIES . RANBAXY TODAY HAS A PRESENCE IN 23 OF THE TOP 25 PHARMACEUTICAL MARKETS OF THE WORLD . THE COMPANY HAS A GLOBAL FOOTPRINT IN 46 COUNTRIES , WORLD-CLASS MANUFACTURING FACILITIES IN 7 COUNTRIES AND SERVES CUSTOMERS IN OVER 125 COUNTRIES . IT WAS INCORPORATED IN 1961 BY SINGH'S GRANDFATHER BHAI MOHAN SINGH, FURTHER HIS SON D R.PARVINDER S INGH SUCCEEDED IT , TRANSFORMING RANBAXY INTO INDIA’S FIRST MULTINATIONAL DRUG FIRM . ? ? ? ? IT WENT PUBLIC IN 1973. 1990 RANBAXY GRANTED US PATENT FOR DOXYCYCLINE. 1992 ENTERED INTO AN AGREEMENT WITH ELI LILLY & CO. OF USA FOR SETTING UP A JOINT VENTURE IN I NDIA TO M ARKET S ELECT LILLY PRODUCTS . RANKED 8 TH AMONGST THE GLOBAL GENERIC PHARMACEUTICAL COMPANIES , ITS
STATED VISION HAS BEEN TO BE AMONG THE TOP FIVE GLOBAL GENERIC PLAYERS
LABORATORIES
? ?
$5 BILLION BY 2012. IT HAS 12,000 EMPLOYEES , INCLUDING 1,200 SCIENTISTS MR. ATULSOBTI IS THE PRESENT CEO & MD OF RANBAXY LABORATORIES .
AND TO ACHIEVE GLOBAL SALES OF
FACTS: ? ? ? ? ? INDIA’S LARGEST PHARMACEUTICAL COMPANY . INCORPORATED IN 1961 ATULSOBTI IS CURRENTLY RANBAXY CEO AND MANAGING DIRECTOR PRESENT CHAIRMAN- TSUTOMU UNE EXPORTS ITS PRODUCTS TO 125 COUNTRIES
? GROUND OPERATIONS IN 46 COUNTRIES ? MANUFACTURING FACILITIES IN 7 COUNTRIES . ? HQ: GURGAON, HARYANA.
HISTORY: ? STARTED BY RANBIR SINGH AND GURBAX SINGH IN 1937. ? IN 1998, RANBAXY ENTERED THE UNITED STATES MARKET ? JAPANESE COMPANY DAIICHI SANKYO GAINED MAJORITY CONTROL IN 2008 FINANCIALS: 2008-GLOBAL SALES OF US $ 1,682 MILLION GROWTH OF 4%. NORTH AMERICA , THE COMPANY'S LARGEST MARKET CONTRIBUTED SALES OF US $ 449MILLION INDIA CLOCKING SALES OF AROUND US $ 300MILLION MARKET SHARE IN INDIA IS 5%
o o o o o
MAJOR SET BACK : DECEMBER 2005, RANBAXY'S SHARES HIT HARD BY A PATENT RULING DISALLOWING PRODUCTION OF ITS OWN VERSION OF PFIZER ’S DRUG LIPITOR S EPTEMBER 2008, THE FDA ISSUED TWO WARNING LETTERS TO RANBAXY AND AN IMPORT ALERT FOR GENERIC DRUGS PRODUCED BY TWO MANUFACTURING PLANTS IN I NDIA.
RANBAXY-DAIICHI SANKYO DEAL
? ON 12TH JUNE 2008, RANBAXY ENTERED INTO AN ALLIANCE WITH ONE OF THE LARGEST JAPANESE INNOVATOR COMPANIES , DAIICHI SANKYO COMPANY L TD., TO CREATE AN
INNOVATOR AND GENERIC PHARMACEUTICAL POWERHOUSE . SIGNED AN AGREEMENT TO ACQUIRE PROMOTERS .
DAIICHI SANKYO CO. LTD .
34.8% OF RANBAXY LABORATORIES LTD. FROM ITS
?
DAIICHI SANKYO EXPECTS TO INCREASE ITS STAKE IN RANBAXY THROUGH VARIOUS MEANS
SUCH AS PREFERENTIAL ALLOTMENT, PUBLIC OFFER AND PREFERENTIAL ISSUE OF
WARRANTS TO ACQUIRE A MAJORITY IN
RANBAXY, I.E. AT LEAST 50.1 %
?
UNDER THE DEAL, DAIICHI SANKYO AGREED TO ACQUIRE 34.8 PER CENT STAKE FOR
AROUND
RS. 10,000 CRORE ($2.4 BILLION) AT RS. 737 ($17) PER SHARE, AT A PREMIUM
OF
31% OVER THE PRICE . (CURRENT PRICE 561 AND DEAL PRICE IS 737) FROM THE MRMALVINDER SINGH AND FAMILY .
PROMOTERS
?
THE JAPANESE COMPANY HAS AGREED TO ACQUIRE 34.81 PER CENT OF THE STAKE OF THE
COMPANY ,
THE COMPANY WILL ALSO MAKE AN OPEN OFFER . THE OPEN OFFER MADE TO THE 20 PER CENT AT RS 737 A SHARE THAT DAIICHI SANKYO’S STAKE IN THE COMPANY TO A MAXIMUM OF 58.09 PER CENT. 4.5 PER CENT THROUGH SHARE WARRANTS TO BE ISSUED ON
PUBLIC SHAREHOLDERS FOR ACQUIRING ANOTHER INCREASE
?
DAIICHI SANKYO PICK UP ANOTHER 9.5 PER CENT THROUGH PREFERENTIAL ALLOTMENT OF
EQUITY SHARES AND ANOTHER A PREFERENTIAL BASIS .
?
THAT COME INTO PLAY IF THE ORDINARY SHAREHOLDERS DON'T RESPOND TO THE OPEN
OFFER AND
DAIICHI SANKYO NEEDS ANOTHER WAY TO RAISE ITS STAKE TO 51%.
DEAL STRUCTURE:
? DAIICHI SANKYO WILL ALSO BE ISSUED FRESH SHARES AND WARRANTS (46.3 MILLION
SHARES
+ 23.8 MILLION WARRANTS ), WHICH WILL RESULT IN A CASH INFUSION OF ABOUT
RS 50 BILLION (@ RS 737/SHARE). THE FRESH SHARES AND WARRANTS WILL BE ISSUED
AT
RS 737/SHARE OR THE RATE DETERMINED BY SEBI RULES, WHICHEVER IS HIGHER . ITS STAKE WILL GO UP TO ABOUT 59% POST THE OPEN OFFER AND THE WARRANTS WILL BE EXERCISABLE 6-18 MONTHS POST ZENOTECH SHAREHOLDERS
?
DAIICHI WILL HAVE TO MAKE AN OPEN OFFER (ON THE EXPANDED CAPITAL) TO RANBAXY
SHAREHOLDERS . EXERCISE OF WARRANTS .
ALLOTMENT . IT WILL ALSO HAVE TO MAKE AN OPEN OFFER TO IN WHICH
RANBAXY HOLDS SIGNIFICANT STAKE . DAIICHI SANKYO AND CONVERSION OF FCCBS. CEO &
? ?
THE SHAREHOLDING POST THE DEAL WILL GO UP ON ACCOUNT OF THE FRESH SHARES AND
WARRANTS ISSUED TO
AFTER THE ACQUISITION , RANBAXY WILL OPERATE AS DAIICHI SANKYO’S SUBSIDIARY BUT
WILL BE MANAGED INDEPENDENTLY UNDER THE LEADERSHIP OF ITS CURRENT
MANAGING DIRECTOR MALVINDER SINGH. ? THE DEAL MADE DAIICHI -RANBAXY, THE COMBINED ENTITY THE 15TH LARGEST
PHARMACEUTICAL COMPANY IN THE WORLD WITH A MARKET CAPITALIZATION OF AROUND
US$30 BILLION BIGGER THAN TEVA BUT STILL FAR SMALLER THAN THE $48-BILLION PFIZER, THE $44-BILLION GLAXOSMITHKLINE AND $40-BILLION NOVARTIS GROUP . ? IT HELPED DAIICHI LEVERAGE ITS INNOVATIVE DRUG MAKING CAPABILITIES AND R&D
EXPERTISE WITH
RANBAXY’S LOW COST MANUFACTURING ABILITIES TO ACHIEVE A
COMPETITIVE POSITION
IN THE WORLD GENERIC
DRUG MARKETC ONSIDERING THAT
RANBAXY IS A GENERICS COMPANY AND DAIICHI SANKYO AN INNOVATOR COMPANY , BOTH
THE BUSINESSES COMPLEMENT EACH OTHER WITH NEGLIGIBLE OVERLAP .
? ?
RANBAXY CAN PROVIDE A LOW COST MANUFACTURING SET- UP TO DAIICHI SANKYO
THROUGH
RANBAXY , ZENOTECH AND ORCHID.
UNLIKE DAIICHI SANKYO, RANBAXY HAS A GEOGRAPHICALLY DIVERSIFIED PRESENCE
ACROSS
US, EUROPE AND EMERGING MARKETS THUS IT WILL BE ABLE TO PROVIDE A DAIICHI SANKYO' PRODUCT PORTFOLIO , INCLUDING IN INDIA. THIS DEAL WILL HELP RANBAXY TAP THIS
WIDER REACH TO
?
RANBAXY HAS A SMALL PRESENCE IN THE JAPANESE MARKET WHERE THE GENERICS
MARKET HOLDS GOOD OPPORTUNITIES . OPPORTUNITY .
?
RANBAXY IS ESSENTIALLY A GENERICS COMPANY WITH EFFORTS TO BUILD ITS PROPRIETARY
BUSINESS .
DAIICHI SANKYO, WHICH HAS EXPERTISE IN INNOVATIVE R&D WILL SUPPORT
RANBAXY'S R&D EFFORTS AND CONTRACT RESEARCH BUSINESS . ? ? RANBAXY WILL INCUR LOWER INTEREST COSTS , AS IT WILL NOW BECOME A DEBT-FREE
COMPANY .
THE DEAL WITH DAIICHI SANKYO WILL STRENGTHEN THE FINANCIALS OF RANBAXY (MAKING
IT DEBT FREE AND CASH RICH ) AND HELP IT GROW AGGRESSIVELY ORGANICALLY AND THROUGH ACQUISITIONS .
WHY RANBAXY DID IT ?
? ? ? A VERY INTELLIGENT DEAL HAD HELD SHARE FOR 50 YEARS BUT THE RANBAXY GROWTH CURVE HAD PEAKED ? 2006 -16% GROWTH ? 2007 -7% GROWTH ? 2009 - 9% GROWTH FORECAST ? ? ? BUSINESS MODEL WAS STRUGGLING WITH HIGH LITIGATION COSTS AND DEVALUATION OF
THE RUPEE AGAINST THE
USD
US STRATEGY WAS LOOKING IN THE FACE OF MORE EXPENSIVE LITIGATION. SELLING OF ENTIRE STAKE AT 30% PREMIUM
WHY DAICHI DID IT?
? JAPAN HAS AN AGEING POPULATION AND THEY NEEDED NEW MARKET ? THERE IS GROWING RECOGNITION IN J APAN OF THE IMPORTANCE OF GENERIC DRUGS ? JAPANESE HEALTH MINISTRY IS ENCOURAGING DOCTORS TO USE GENERIC DRUGS TO
REDUCE THE HEALTH BUDGET
? ACQUISITION OF RANBAXY GIVES DAIICHI A LOW COST MANUFACTURING BASE IN INDIA ? DAIICHI WILL HAVE A STRONG GENERICS OPERATIONS IN INDIA AND OPERATIONS IN 60
DIFFERENT COUNTRIES
? DAIICHI MOVES FROM 22ND RANK TO 15TH AMONG WORLD LARGEST PHARMACEUTICAL
COMPANIES .
MY OPINION ABOUT THE DEAL DECISION BEFORE MERGER
I. II. DAIICHI SANKYO 25TH LARGEST PHARMACEUTICAL COMPANY IN THE WORLD RANBAXY WAS THE 8 TH LARGEST GENERIC DRUG MAKER IN THE WORLD
AFTER MERGER
I. II. RANBAXY DAIICHI 15TH LARGEST PHARMACEUTICAL COMPANY RANBAXY TO BE AMONG THE TOP FIVE GENERIC DRUG MAKERS IN THE WORLD
COMMON INFLUENCES
? ? ? ? ?
OF MERGER ON BOTH
DAIICHI
AND
RANBAXY
REDUCED COMPETITION & CHOICE FOR CONSUMER IN OLIGOPOLY MARKET LIKELIHOOD OF JOB CUTS CONFLICT WITH NEW MANAGEMENT DIFFICULTY IN CULTURAL INTEGRATION MONETARY COST TO THE COMPANY
DAIICHI SANKYO’S MOVE TO ACQUIRE RANBAXY WILL ENABLE THE COMPANY TO GAIN THE BEST OF BOTH WORLDS WITHOUT INVESTING HEAVILY INTO THE GENERIC BUSINESS .
THE PATENT PERSPECTIVE OF THE MERGER CLEARLY INDICATES THE INTENTIONS OF BOTH
COMPANIES IN FILLING THE RESPECTIVE VOID SPACES OF THE OTHER AND EMERGE AS A GLOBAL LEADER IN THE PHARMACEUTICAL INDUSTRY .
RANBAXY HAS BECOME PART OF A JAPANESE CORPORATE FRAMEWORK, WHICH IS EXTREMELY REPUTED IN THE CORPORATE WORLD . AS A GENERICS PLAYER , RANBAXY IS VERY WELL PLACED IN BOTH INDIA AND ABROAD ALTHOUGH ITS SHARE PERFORMANCE BELIEVES ITS TRUE POTENTIAL .
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