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CASE STUDY OF RANBAXY & DAIICHI - SANKYO

Introduction Daiichi Sankyo Company Limited


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 Sankyos 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.

Ranbaxy Laboratories 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. Ranbaxys continued focus on R&D has resulted in several approvals in developed markets and significant progress in New Drug Discovery Research. The Companys 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.

THE DEAL

Japan

Daiichi

India

Promoters
Transfer of 38.4% Shares

Ranbaxy

Public Shareholder
Transfer Open Offer 20%

Deal price Rs. 737 per share Total amount invested by Daiichi Rs.2,15,000 million

Chairman, CEO & M.D.

Dr. Tsutomu Une Chairman

Malvinder Mohan Singh

CEO & M. D.

Particulars
Acquisition of Shares under Open Offer

Number of Shares
92,519,126

Allotment of Shares on Preferential basis

46,258,063

Acquisition of Shares from the Singh family

129,934,134

Sector
Reuters Bloomberg Equity Capital (Rs mn) Face Value (Rs) 52 Week H/L (Rs) Market Cap (Rs bn/ USD mn) Daily Avg Vol. (No of shares) Daily Avg Turnover (US$)

Pharmaceuticals
RANB.BO RBXY@IN 67 5 614/300 164/3,840

52456297

63.3

CHRONOLOGY OF KEY EVENTS

Date
June 11, 2008

Event
Signing of Agreement by Daiichi with Ranbaxy and its Promoters
Public announcement by Daiichi to the shareholders of Ranbaxy to acquire additional 20% equity shares at Rs.737 per share under the Takeover Code. Ranbaxy announces its settlement with Pfizer over Lipitor litigation worldwide.

June 14, 2008

June 18, 2008

June 27, 2008

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

July 15, 2008

Approval of preferential allotment of equity shares and warrants to Daiichi by the shareholders of Ranbaxy. Daiichi receives SEBIs observation on the draft letter of offer FIPB approves the proposed investment, subject to approval of CCEA

August 4, 2008

August 6, 2008

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

August 16, 2008 Opening of open offer


September 4, 2008 Closing of open offer October 3, 2008 Receipt of approval from CCEA for foreign investment

Acquisition of 20% equity stake by October 15, 2008 Daiichi pursuant to open offer SEBI rejects Promoters application to sell their equity stake through a October 16, 2008 block deal on the stock market

October 20, 2008

Ranbaxy becomes subsidiary of Daiichi upon increase in Daiichis stake to 52.5% (including preferential allotment and transfer of 1st tranche shares from Promoters) Daiichi acquires balance 11.42% shares from the Promoters off the stock market and the deal is concluded. Daiichis equity stake in Ranbaxy up to 63.92%

November 7, 2008

A very intelligent deal

Had held share for 50 years

Selling of entire stake at 30% premium

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

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

RANBAXY a Generics Maker

Daiichi: an Innovator

A Merger termed as the Ardhnarishwar Model

Significant milestone in research-based pharmaceutical company.

becoming a international

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.

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 Ranbaxys low-cost manufacturing infrastructure and supply chain strengths.

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.

Reduced competition & choice for consumer in oligopoly market


Conflict with new management Difficulty in cultural integration Monetory cost to the company

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

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

Hence, proving the deal to be disadvantage to the industry