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
THANK YOU
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