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Macr case

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  • 1. Ranbaxy DaiichiGroup: 2
  • 2. The Deal
    DAIICHI announced acquisition of Ranbaxy Laboratories by paying $ 4.2 billion for 51% stake
    EV of RANBAXY =$ 8.5 billion as valued by Daiichi
    acquisition with Equity shares 4203.69 lakhsin 2008 with a Face value of Rs. 5 per share
    Deal expected to make combined unit the 15th largest pharmaceutical company
    Purchase Price: Rs. 737( Premium of 31.4% w.r.t 10thjune 08 prices)
  • 3. Ranbaxy & Daiichi
    Ranbaxy was largest pharmacompanies of India
    Its global sales in 2008 was US $ 1,682
    80% revenue from exports. 26% sales from US, 23% UK
    Daiichi Sankyo:Merger of Daiichi & Sankyo
    It has maximum sales in Japan 68% followed by 20% USA and 9% Europe
  • 4. Market Scenario Pharmaceutical products
    Products were “officially approved copies” of original products whose patent had expired
    Market’s expected growth rate was 10.9% for the next five years
    Issue of Intellectual Property rights
    Indian market for pharmaceutical products is 4th in terms of production 15th in consumption
    size of US $ 14 bns in 2007-08 & expected incremental growth of $14 bns from 2005-15
  • 5. Funding the Deal
    50% of the cost of acquisition secured by bank borrowings and 50% through internal accruals
    Position of Daiichi as on end march 2008
  • 6. Advantages to Daiichi
    DAIICHI:22nd to 15th position in the world
    2nd company after Novartis in Innovativeness and generic business
    Increase in generic product portfolio
    access to RANBAXY‟S world class manufacturing facilities in 14 countries and 1100 R & D teams
    Strengthening itself in Japan, getting employees at lower cost
    Japanese market situation: Aging population, increased importance of generic drugs
  • 7. Advantages to Ranbaxy
    RANBAXY would get larger product basket globally
    Gain entry to Japan( Largest pharma market)
    The presence of DAIICHI and its R & D expertise would enable it to advance its branded drugs business.
    Finally, RANBAXY would become a debt free company.
    Leverage upon Daiichi’s innovation & technology
  • 8. Concerns
    Delay in product launch, competitor takes market share( Pfizer)
    Competitor carry the patents in generic drug which are still to expire
    High R&D and regulatory costs( FDA approval: $800 million)
    Cultural Issues and compatibility of products
    Lacking expertise in running global business
    Currency hedges by RANBAXY would cost DAIICHI $ 122 mn. The rupee was getting depreciated against the USD.