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)
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
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
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
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
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
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.