Macr case

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Macr case

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

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