Description
It describes the deal in detail with all the financials and details.
An acquisition, also known as a takeover, is the buying of one company (the ‘target’) by another. There is no exchange or consolidation of the company. There are two types of acquisition: a) HOSTILE b) FRIENDLY
Corporate Profile:
• Established in 1937 by Ranjit Singh and Gurbax Singh • India’s largest pharmaceutical company • Ranked among world’s top 10 generic company • It has a presence in 23 of world’s top 25 pharmaceutical market with export in over 125 countries
Corporate Profile…
• Having manufacturing facilities in 11 countries. • Annual Sales in FY’07: US$ 1.6 Bn • Work Force: 12,000 comprising of 50 nationalities. • The company has a vision to become one of the top 5 generic companies in the world
2006 Ranbaxy Acquired Unbranded Generic Business Of GSK In Italy And Spain 2003 Receives The Economic Times Award For Corporate Excellence For ‘The Company Of The Year 2002-03’ 1998 Ranbaxy Enters USA Worlds Largest Pharma Market, With Products Under Own Name 1995 Acquisition Of Ohm Laboratories In Us
1992 Company Enters Into An Agreement To Setup A Joint Venture In China Ranbaxy Ltd. 1985 Ranbaxy Research Foundation Is Established
1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup
1961 Company Incorporate
STRENGTHs of ranbaxy
? Cost effective technology
? Drug delivery system management ? Production of generic drugs
? Pharmaceutical ingredients ( apis) future growth drivers
Formation of Daiichi Sankyo
Daiichi Sankyo Company, Limited, Japan
2005
Daiichi Pharmaceutical Co., Ltd.
Sankyo Company, Limited
HISTORY OF DAIICHI-SANKYO
DAIICHI SANKYO • 1915 Arsemin Shokai, DAIICHI’s • 1899 SANKYO Shoten, SANKYO’s predecessor company, predecessor company, established in Japan established in Japan • 1982 DAIICHI establishes its US • 1985 SANKYO establishes subsidiary in New York SANKYO Europe in Düs Germany • 2004 Daiichi establishes DAIICHI • 2002 Acquisition of Laboratories Medical Research, INC.in the United States Fornet S.A., France
2005 DAIICHI AND SANKYO ANNOUNCE IN FEBRUARY THEIR AGREEMENT TO MERGE
DAIICHI-SANKYO COMPANY LIMITED
• Established in Sept. 28th 2005.(JAPAN)??? • CEO :TAKASHI SHODA • Workforce : 16,237 People. • Major Industry : Ethical Drug Manufactures. • Annual Sales in FY’07: US$ 8.7 Bn
MISSION
“TO CONTRIBUTE
ENRICHMENT AROUND CREATION & OF QUALITY THE WORLD
TO
THE
THE
OF LIFE
THROUGH
PROVISION OF INNOVATIVE
PHARMACEUTICALS.”
STRENGTHS OF DAIICHI-SANKYO
• Japan’s second largest drug maker company
•Ranked 22nd drug maker in the world • Providing a stable supply of top-quality pharmaceutical products
Rationale of the deal
Presence in emerging markets for Daiichi-Sankyo
Geographical diversification
Entry into non-proprietary drugs for Daiichi-Sankyo
Product Extension
SYNERGY
Realization of sustainable growth through a complementary business model
Acceleration of innovative drug creation by optimizing value chain efficiency.
Shareholding Pattern of Ranbaxy Laboratories Ltd.
0.89% 0.00% 1.72% Daiichi Sankyo Mutul Funds
12.43%
Banks, Fin. Inst., Ins Co.
5.30%
4.16%
FIIs Private Corporate Bodies
9.57%
63.92% 2.01%
Indian Public
Foreign Nationals NRIs/OCBs
As of Dec. 2008
GDRs
• Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on 11th June, 2008 • It will make an open offer to the Ranbaxy shareholders for another 20% • It will pick up another 9.4% through preferential allotment • It was an all cash transaction • Size of the deal: US$3.4-4.6 Bn • Deal values Ranbaxy at US $ 8.5
How did Daiichi-Sankyo acquire Ranbaxy?
How much did Daiichi-Sankyo pay?
Nature of transaction Open market share purchases Share purchases from founding family Acquisition consideration (in million yens) 169,407 Gain of promoters 230,970 85,001 2,974
Share purchases by issuance of new Money infused in Ranbaxy’s balance shares sheet Direct acquisition related expenditures
Total
488,354
How did Daiichi-Sankyo value Ranbaxy?
Assets and Liabilities Book value of assets and liabilities (Cash, Inventory etc.) Inventories (Increase in inventories to fair value) Tangible assets (Land) Intangible assets (Leasehold land) Intangible assets (Increase in current products, etc. to fair value) In-process R&D expenses Deferred tax liability
Minority Interests
Value attributed (Yen billions)
78.8 2.0 10.0 5.9 41.0 6.9 (20.0)
(45.0)
Goodwill
408.7
83.69 %
Total consideration
488.3
Valuation of Ranbaxy Laboratories Ltd.
Price paid per share by Daiichi 52 week high / low as on 11th June 2008 for Ranbaxy share Valuation of 63.92% stake by Daiichi Rs.737 Rs. 593 / 300 19804 crores
Valuation of 100% equity of Ranbaxy as per the 30982 crores deal Enterprise valuation of Ranbaxy (on a fully diluted basis) Market capitalization of Ranbaxy as on 30th May 2009 (conclusion of deal) $ 8.5 billion 10434 crores
Global down turn due to the financial crisis has made Daiichi take a huge hit on its balance sheet due to the acquisition of Ranbaxy.
Impact of Ranbaxy deal on Daiichi-Sankyo Balance Sheet
In Yens billion Net profit / (loss) for Daiichi-Sankyo in FY2008 Net profit / (loss) for Daiichi-Sankyo in FY2009 Net cash used in investing activities in FY2008 Net cash used in investing activities in FY2009 Short term bank loans in FY2008 Short term bank loans in FY2009 97.6 (215.5) 49.4 413.8 0.1 264.3 Reason Recording of ¥351.3 billion in extraordinary losses due to a one-time write-down of goodwill pertaining to the investment in Ranbaxy. It is due to the cash acquisitions of shares in U3 Pharma and Ranbaxy, which entailed cash outgos. Borrowings for the acquisition of Ranbaxy's share ¥ +240.0 billion Increase by consolidation of Ranbaxy
Impact of Ranbaxy deal on Daiichi’s Balance Sheet
In Yens (billion) 0.7 20.5 Reason Loss on valuation of derivatives in FY 2008 Loss on valuation of derivatives in FY 2009 Consolidation of Ranbaxy: ¥ +14.8 billion
Foreign exchange losses in FY 2008
Foreign exchange losses in FY 2008 Purchases of investments in consolidated subsidiaries in FY 2008 Purchases of investments in consolidated subsidiaries in FY 2008
0
17.5 0.8
Consolidation of Ranbaxy: ¥ -10.6 billion
Acquisition of Ranbaxy: ¥387.0 billion
411.3
Financing of Deal
• Daiichi-Sankyo funded the acquisition through debt
and existing cash reserves.
• Daiichi-Sankyo has a taken a short and long term
loans of 240 billion yens.
• That’s almost 50% of the total funding requirement
of the deal.
US FDA Invocation on Ranbaxy
• In September 2008, the U.S. FDA issued a warning letter that Ranbaxy’s production facilities in India at Paonta Sahib and Dewas
were in violation of U.S. current Good Manufacturing Practice.
• It placed a ban on the importation of any products for the U.S. market from these two facilities.
• In February 2009, the FDA invoked its Application Integrity Policy (AIP) against the Paonta Sahib facility. An AIP is invoked when questions arise concerning the integrity and reliability of data in drug applications, and it requires the facility where the relevant data were obtained to re-apply for approval or to withdraw the application.
Risks in the deal for Daiichi-Sankyo
• Ranbaxy’s???exposure???to???the???US???dollar. • US FDA invocation may affect overall business in the country. • The anticipated synergies may fail to realize if Ranbaxy faces regulatory hurdles world over.
Post Acquisition Objectives
• To develop new drugs to fill the gaps and take???advantage???of???Ranbaxy’s???strong??? areas. To overcome its current challenges in cost structure and supply chain.
To match the competitor's strategy
•
•
BENEFITS TO RANBAXY AFTER MERGER
?Company will become one of the top 5 in
generic business.
? Access to Daiichi advanced R & D
? Access to Japanese drug market
? Infusion of an additional $ 1 billion into the
company. ?Surplus cash of Rs.3,000 crore used for acquisition in generic place. ? Promoted as Independent generic arm of the
company.
BENEFITS TO DAIICHI SANKYO AFTER MERGER
?Strengthen the position of the company ?Faces intense competition from generics in it’s home market ?Acquisition will provide low cost manufacturing
?Market access to over 60 countries
Ranbaxy-Daiichi
will be the 15th largest drug maker in the world with the market capitalization of $ 30 Bn.
EFFECT OF THE DEAL ON STOCK MARKET
?Expectation was near around Rs. 737 per share ?Ranbaxy fell 3 % to Rs. 543 on the BSE.
Three Main Reasons:
• Low acceptance ratio
• Capital gains tax will have to be paid on share through open offer.
• Market are not affected even if 30 % dilution in equity.
DISADVANTAGE FOR INDIAN PHARMA. INDUSTRY
•
• www.ranbaxy.co.in
• www. daiichisankyo.com • www.moneycontrol.com
doc_719730289.pptx
It describes the deal in detail with all the financials and details.
An acquisition, also known as a takeover, is the buying of one company (the ‘target’) by another. There is no exchange or consolidation of the company. There are two types of acquisition: a) HOSTILE b) FRIENDLY
Corporate Profile:
• Established in 1937 by Ranjit Singh and Gurbax Singh • India’s largest pharmaceutical company • Ranked among world’s top 10 generic company • It has a presence in 23 of world’s top 25 pharmaceutical market with export in over 125 countries
Corporate Profile…
• Having manufacturing facilities in 11 countries. • Annual Sales in FY’07: US$ 1.6 Bn • Work Force: 12,000 comprising of 50 nationalities. • The company has a vision to become one of the top 5 generic companies in the world
2006 Ranbaxy Acquired Unbranded Generic Business Of GSK In Italy And Spain 2003 Receives The Economic Times Award For Corporate Excellence For ‘The Company Of The Year 2002-03’ 1998 Ranbaxy Enters USA Worlds Largest Pharma Market, With Products Under Own Name 1995 Acquisition Of Ohm Laboratories In Us
1992 Company Enters Into An Agreement To Setup A Joint Venture In China Ranbaxy Ltd. 1985 Ranbaxy Research Foundation Is Established
1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup
1961 Company Incorporate
STRENGTHs of ranbaxy
? Cost effective technology
? Drug delivery system management ? Production of generic drugs
? Pharmaceutical ingredients ( apis) future growth drivers
Formation of Daiichi Sankyo
Daiichi Sankyo Company, Limited, Japan
2005
Daiichi Pharmaceutical Co., Ltd.
Sankyo Company, Limited
HISTORY OF DAIICHI-SANKYO
DAIICHI SANKYO • 1915 Arsemin Shokai, DAIICHI’s • 1899 SANKYO Shoten, SANKYO’s predecessor company, predecessor company, established in Japan established in Japan • 1982 DAIICHI establishes its US • 1985 SANKYO establishes subsidiary in New York SANKYO Europe in Düs Germany • 2004 Daiichi establishes DAIICHI • 2002 Acquisition of Laboratories Medical Research, INC.in the United States Fornet S.A., France
2005 DAIICHI AND SANKYO ANNOUNCE IN FEBRUARY THEIR AGREEMENT TO MERGE
DAIICHI-SANKYO COMPANY LIMITED
• Established in Sept. 28th 2005.(JAPAN)??? • CEO :TAKASHI SHODA • Workforce : 16,237 People. • Major Industry : Ethical Drug Manufactures. • Annual Sales in FY’07: US$ 8.7 Bn
MISSION
“TO CONTRIBUTE
ENRICHMENT AROUND CREATION & OF QUALITY THE WORLD
TO
THE
THE
OF LIFE
THROUGH
PROVISION OF INNOVATIVE
PHARMACEUTICALS.”
STRENGTHS OF DAIICHI-SANKYO
• Japan’s second largest drug maker company
•Ranked 22nd drug maker in the world • Providing a stable supply of top-quality pharmaceutical products
Rationale of the deal
Presence in emerging markets for Daiichi-Sankyo
Geographical diversification
Entry into non-proprietary drugs for Daiichi-Sankyo
Product Extension
SYNERGY
Realization of sustainable growth through a complementary business model
Acceleration of innovative drug creation by optimizing value chain efficiency.
Shareholding Pattern of Ranbaxy Laboratories Ltd.
0.89% 0.00% 1.72% Daiichi Sankyo Mutul Funds
12.43%
Banks, Fin. Inst., Ins Co.
5.30%
4.16%
FIIs Private Corporate Bodies
9.57%
63.92% 2.01%
Indian Public
Foreign Nationals NRIs/OCBs
As of Dec. 2008
GDRs
• Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on 11th June, 2008 • It will make an open offer to the Ranbaxy shareholders for another 20% • It will pick up another 9.4% through preferential allotment • It was an all cash transaction • Size of the deal: US$3.4-4.6 Bn • Deal values Ranbaxy at US $ 8.5
How did Daiichi-Sankyo acquire Ranbaxy?
How much did Daiichi-Sankyo pay?
Nature of transaction Open market share purchases Share purchases from founding family Acquisition consideration (in million yens) 169,407 Gain of promoters 230,970 85,001 2,974
Share purchases by issuance of new Money infused in Ranbaxy’s balance shares sheet Direct acquisition related expenditures
Total
488,354
How did Daiichi-Sankyo value Ranbaxy?
Assets and Liabilities Book value of assets and liabilities (Cash, Inventory etc.) Inventories (Increase in inventories to fair value) Tangible assets (Land) Intangible assets (Leasehold land) Intangible assets (Increase in current products, etc. to fair value) In-process R&D expenses Deferred tax liability
Minority Interests
Value attributed (Yen billions)
78.8 2.0 10.0 5.9 41.0 6.9 (20.0)
(45.0)
Goodwill
408.7
83.69 %
Total consideration
488.3
Valuation of Ranbaxy Laboratories Ltd.
Price paid per share by Daiichi 52 week high / low as on 11th June 2008 for Ranbaxy share Valuation of 63.92% stake by Daiichi Rs.737 Rs. 593 / 300 19804 crores
Valuation of 100% equity of Ranbaxy as per the 30982 crores deal Enterprise valuation of Ranbaxy (on a fully diluted basis) Market capitalization of Ranbaxy as on 30th May 2009 (conclusion of deal) $ 8.5 billion 10434 crores
Global down turn due to the financial crisis has made Daiichi take a huge hit on its balance sheet due to the acquisition of Ranbaxy.
Impact of Ranbaxy deal on Daiichi-Sankyo Balance Sheet
In Yens billion Net profit / (loss) for Daiichi-Sankyo in FY2008 Net profit / (loss) for Daiichi-Sankyo in FY2009 Net cash used in investing activities in FY2008 Net cash used in investing activities in FY2009 Short term bank loans in FY2008 Short term bank loans in FY2009 97.6 (215.5) 49.4 413.8 0.1 264.3 Reason Recording of ¥351.3 billion in extraordinary losses due to a one-time write-down of goodwill pertaining to the investment in Ranbaxy. It is due to the cash acquisitions of shares in U3 Pharma and Ranbaxy, which entailed cash outgos. Borrowings for the acquisition of Ranbaxy's share ¥ +240.0 billion Increase by consolidation of Ranbaxy
Impact of Ranbaxy deal on Daiichi’s Balance Sheet
In Yens (billion) 0.7 20.5 Reason Loss on valuation of derivatives in FY 2008 Loss on valuation of derivatives in FY 2009 Consolidation of Ranbaxy: ¥ +14.8 billion
Foreign exchange losses in FY 2008
Foreign exchange losses in FY 2008 Purchases of investments in consolidated subsidiaries in FY 2008 Purchases of investments in consolidated subsidiaries in FY 2008
0
17.5 0.8
Consolidation of Ranbaxy: ¥ -10.6 billion
Acquisition of Ranbaxy: ¥387.0 billion
411.3
Financing of Deal
• Daiichi-Sankyo funded the acquisition through debt
and existing cash reserves.
• Daiichi-Sankyo has a taken a short and long term
loans of 240 billion yens.
• That’s almost 50% of the total funding requirement
of the deal.
US FDA Invocation on Ranbaxy
• In September 2008, the U.S. FDA issued a warning letter that Ranbaxy’s production facilities in India at Paonta Sahib and Dewas
were in violation of U.S. current Good Manufacturing Practice.
• It placed a ban on the importation of any products for the U.S. market from these two facilities.
• In February 2009, the FDA invoked its Application Integrity Policy (AIP) against the Paonta Sahib facility. An AIP is invoked when questions arise concerning the integrity and reliability of data in drug applications, and it requires the facility where the relevant data were obtained to re-apply for approval or to withdraw the application.
Risks in the deal for Daiichi-Sankyo
• Ranbaxy’s???exposure???to???the???US???dollar. • US FDA invocation may affect overall business in the country. • The anticipated synergies may fail to realize if Ranbaxy faces regulatory hurdles world over.
Post Acquisition Objectives
• To develop new drugs to fill the gaps and take???advantage???of???Ranbaxy’s???strong??? areas. To overcome its current challenges in cost structure and supply chain.
To match the competitor's strategy
•
•
BENEFITS TO RANBAXY AFTER MERGER
?Company will become one of the top 5 in
generic business.
? Access to Daiichi advanced R & D
? Access to Japanese drug market
? Infusion of an additional $ 1 billion into the
company. ?Surplus cash of Rs.3,000 crore used for acquisition in generic place. ? Promoted as Independent generic arm of the
company.
BENEFITS TO DAIICHI SANKYO AFTER MERGER
?Strengthen the position of the company ?Faces intense competition from generics in it’s home market ?Acquisition will provide low cost manufacturing
?Market access to over 60 countries
Ranbaxy-Daiichi
will be the 15th largest drug maker in the world with the market capitalization of $ 30 Bn.
EFFECT OF THE DEAL ON STOCK MARKET
?Expectation was near around Rs. 737 per share ?Ranbaxy fell 3 % to Rs. 543 on the BSE.
Three Main Reasons:
• Low acceptance ratio
• Capital gains tax will have to be paid on share through open offer.
• Market are not affected even if 30 % dilution in equity.
DISADVANTAGE FOR INDIAN PHARMA. INDUSTRY
•
• www.ranbaxy.co.in
• www. daiichisankyo.com • www.moneycontrol.com
doc_719730289.pptx