CASE STUDY OF RANBAXY & DAIICHI -

SANKYO

Daiichi Sankyo Company, Limited was established in 2005 through the merger of two leading Japanese pharmaceutical companies. This integration created a more robust organization that allows for continuous development of novel drugs that enrich the quality of life for patients around the world. A central focus of Daiichi Sankyo’s research and development are thrombotic disorders, malignant neoplasm, diabetes mellitus, and autoimmune disorders. Equally important to the company are hypertension, hyperlipidemia or atherosclerosis and bacterial infections.

IntroductionDaiichi Sankyo Company

Limited

Ranbaxy Laboratories Limited, 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’s continued focus on R&D has resulted in several approvals in developed markets and significant progress in New Drug Discovery Research. The Company’s foray into Novel Drug Delivery Systems has led to proprietary "platform technologies," resulting in a number of products under development. The Company is serving its customers in over 125 countries and has an expanding international portfolio of affiliates, joint ventures and alliances, ground operations in 49 countries and manufacturing operations in 11 countries.

Ranbaxy Laboratories Limited:

THE DEAL

Daiichi

Promoters Public Shareholder

Japan

India

Transfer of 38.4% Shares

Transfer Open Offer 20%

Ranbaxy

Deal price – Rs. 737 per shareTotal amount invested by Daiichi – Rs.2,15,000

million

Chairman, CEO & M.D.

Dr. Tsutomu Une Chairman

Malvinder Mohan Singh CEO & M.

D.

Particulars Number of Shares

Acquisition of Shares under Open Offer

92,519,126

Allotment of Shares on Preferential basis

46,258,063

Acquisition of Shares from the Singh family

129,934,134

Sector PharmaceuticalsReuters RANB.BO

Bloomberg RBXY@IN

Equity Capital (Rs mn) 67

Face Value (Rs) 5

52 Week H/L (Rs) 614/300

Market Cap (Rs bn/ USDmn)

164/3,840

Daily Avg Vol. (No ofshares)

52456297

Daily Avg Turnover (US$) 63.3

CHRONOLOGY OF KEY EVENTS

Date EventJune 11,

2008Signing of Agreement by Daiichi with Ranbaxy and its Promoters

June 14, 2008

Public announcement by Daiichi to the shareholders of Ranbaxy to acquire additional 20% equity shares at Rs.737 per share under the Takeover Code.

June 18, 2008

Ranbaxy announces its settlement with Pfizer over Lipitor litigation worldwide.

June 27, 2008

Submission of draft letter of offer by Daiichi to SEBI for its observations

July 15, 2008Approval of preferential allotment of equity shares and warrants to Daiichi by the shareholders of Ranbaxy.

August 4, 2008Daiichi receives SEBI’s observation on the draft letter of offer

August 6, 2008FIPB approves the proposed investment, subject to approval of CCEA

August 11, 2008Daiichi issues revised schedule of activities due to delayed receipt of SEBI observation

August 16, 2008 Opening of open offer

September 4, 2008

Closing of open offer

October 3, 2008Receipt of approval from CCEA for foreign investment

October 15, 2008Acquisition of 20% equity stake by Daiichi pursuant to open offer

October 16, 2008

SEBI rejects Promoter’s application to sell their equity stake through a block deal onthe stock market

October 20, 2008

Ranbaxy becomes subsidiary of Daiichi upon increase in Daiichi’s stake to 52.5%(including preferential allotment and transfer of 1st tranche shares from Promoters)

November 7, 2008

Daiichi acquires balance 11.42% shares from the Promoters off the stock market and the deal is concluded. Daiichi’s equity stake in Ranbaxy up to 63.92%

A very “ intelligent” deal

Had held share for 50 years

Selling of entire stake at 30% premium

WHY RANBAXY DID IT ?

Japan has an ageing population and they needed new market

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

WHY DAICHI DID IT ?

EFFECTS ON PHARMA INDUSTRY

THE EFFECTS ON RANKINGS

Before Merger Ranbaxy 8th largest Generic Drug Maker in the

World Daiichi Sankyo 25th Largest Pharmaceutical

Company in the World

After Merger Ranbaxy Daiichi 15th Largest Pharmaceutical

Company Ranbaxy to be among the top five Generic Drug

makers in the world

The New Trend

RANBAXY a Generics Maker

Daiichi: an Innovator

A Merger termed as the “Ardhnarishwar” Model

Significant milestone in becoming a research-based international pharmaceutical company.

Ranbaxy will gain easier access to the much-coveted Japanese market by operating from within the Daiichi Sankyo

The immediate benefit for Ranbaxy is that the deal frees up its debt and imparts more flexibility into its growth plans.

For Ranbaxy

Easier to enter the Indian market. Bigger goal - in securing a strong presence

in the global market for generics. The acquisition will help Daiichi Sankyo to

jump from number 22 in the global pharmaceutical sector to number 15.

The main benefit is Ranbaxy’s low-cost manufacturing infrastructure and supply chain strengths.

For Daiichi

Loss of good influencing people from pharma sector

Maximum use of available natural resources and not rational use.

Use the Indian talent in good manner at cheap rate.

Capture of rich Indian generic store.

Effect of deal on India as whole

Reduced competition & choice for consumer in oligopoly market

Conflict with new management

Difficulty in cultural integration

Monetory cost to the company

Common influences of merger on both Daiichi and Ranbaxy

Daichii have to face competitors of Ranbaxy

Price Daiichi paid for acquisition was quite high compared to the present pricing of other Indian generic drug making companies.

Lots of government restrictions on Ranbaxy drug

Impact of it on Daiichi

Effect on Indian Pharmaceutical Industry

Ranbaxy fell 3% on stock market because of low acceptance and capital gains

Hence, proving the deal to be disadvantage to the industry

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