As Sun pharma becomes the top formulation player with its Ranbaxy takeover, lets see how is the deal for its investors and stakeholders?

1. SUNBAXY-MakingOf A NewIndianPharma
Giant
By
MihirPandit
NMIMS-MUMBAI
mihir_pandit20@yahoo.com
©

2. Deal Announcement
 On 6th April, Sun Pharma, Valued in the market at Rs. 1,22,128 Cr, struck one of the
biggest deals in recent times to take over pharma major Ranbaxy Laboratories,
which attracts a valuation of only Rs. 19,070 Cr, from Daiichi Sankyo Company of
Japan.
 In 2008, Daiichi Sankyo paid reportedly US$ 4.6 billion to acquire 63.8 percent
stake in Ranbaxy.
 After Sun Pharma’s acquisition of Ranbaxy with US$ 3.2 billion in 2014, Daiichi
Sankyo will hold just 9 per cent of Sun Pharma, which is currently worth US$ 2
billion.
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3. Tested Formula of Sun Pharma
USFDA
ISSUES
COMPANY
“Good Valuation”
“No Negotiation”
 Earlier also, Dilip Shanghvi Mr. Fix-it of Pharma Industry has acquired a reputation for
acquiring companies in trouble at a good price, and then turning around their operations.
E.g. Caraco and Taro.
 Ranbaxy will certainly be a big challenge.
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4. TransactionHighlights:All Stock Deal-Cashless Share swap
RANBAXY LABORATORIES
LTD
% Holdings (31/03/2014)
Daiichi Sankyo (Promoter ) 63.41 %
Institutional Investors 19.55 %
Other Investors 5.53 %
General Public 11.51 %
Total 100 %
Daiichi Sankyo
SUN Pharma
100 % Stake
0.8 Share of Sun
1 Share of Ranbaxy
Ranbaxy will be merge
The total equity value of the transaction is $3.2 billion with each Ranbaxy share priced at Rs
457. While the total equity value is $3.2 billion, taking Ranbaxy's debt into account, the
transaction is worth over $4 billion.
Will
receive 9
% stake in
sun
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5. Valuation
• The deal values Ranbaxy shares at Rs. 457 apiece, representing an 18 % premium
to their 30-day volume-weighted average share price and valuation is 2.2 times
Ranbaxy’s sales in calendar year 2013.
Ranbaxy A B C=A*B D= C/ 60
% Stake Total No. of Shares of
Ranbaxy
Implied Value
of each Share
of Ranbaxy
(Rs.)
Total
Equity
Value
(Rs.)
In Cr
Total equity
value
(USD)
In Billions
100 % 423,741,782 457 19,365 Cr 3.2 Billion
* 1 USD= 60 INR
Swap Ratio (Ran: Sun) Total No. of shares of
Ranbaxy
No. of shares of Sun to be
Swap
1 : 0.8 423,741,782 338,993,425
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6. Valuation
Equity dilution of Sun Pharma:
= No. of shares of Sun to be swap / Total no. of shares of Sun*100
= 338,993,426 / 2,071,163,910 *100
= 16.36 %
Inference: Sun Pharma’s shareholders may blink at the immediate effect of
equity dilution of 16.4% and the effect on its profitability in the near term.
But, Sun has a track record in acquisitions that inspires confidence and is
often seen as a master turnaround company with a proven track record of
investing the necessary resources to successfully integrate acquired company.
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7. Synergy

8. SUNBAXY
Will have operations in 65 countries, 47
manufacturing facilities across 5 continents
No. 1 Pharma company in India with
leadership in 13 specialty segments
Strong OTC
business with
trusted brands
No.1 Pharma
Company in
the US market 5th largest global specialty
generic pharma company
Approaching $ 1 billion sales in
high growth emerging market
Daiichi Sankyo to become 2nd
largest shareholder in Sun
Pharma
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9. 37%
16%
16%
13%
10%
8%
Clear Leadership [ Chronic Therapies + Acute
Therapies + OTC Business]
Others
Neuropsychiatry
Cardiology
Antiinfectives
Gastroenterology
Pain and Analgesics
Combined entity will
have 15 % of top 300
Brands in India
CLEAR LEADERSHIP
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10. SUN PHARMA SUNBAXY
60%
29%
47%
23%
21%
22%
17%
50%
31%
US India RoW
GLOBALFOOTPRINT
% Sales
(2013)
Clear advantage
in US market
- Ranbaxy’s Health pipeline of ANDAs, including few high value FTFs and this will
generate cash flows of up to Rs. 3055 Cr for sun in the near term.
- After the acquisition 184 ANDAs, including high value FTFs is expected in Sun’s
Portfolio. ©

11. 15,109
6,670
10,802
907
Revenue
Operating
Profit
SUN PHARMA RANBAXY
7,577
25,911
SUNBAXY
Values in INR Cr As per financial data Dec. 2013
44.1%
8.4%
29.2%
% Operating
profit
margin
Revenue of Combined entity will increase, but operating profit margin of Sun pharma will decrease after merger.
SUNBAXY-INCOME STATEMENT
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12. OperatingSynergy
At least 40% of savings
is expected from a cut in
sales force at various
locations.
20-25% is expected through
rationalizing the distribution
channel, mainly in India and
the US.
The rest will be from cutting
overlaps in products and
manufacturing sites, industry
consultants and analysts say.
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13. Andget some Extra………………………….
 After the merger, Daiichi would come to own 9 % stake in Sun Pharma.
 It would probably help SUNBAXY enter Japan, which is a long term growth
market due to very low penetration of generics drugs and medicines
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14. STOCKMARKET:THEROAD AHED
• Market reaction after deal announcement: On 7th april, Ranbaxy’s shared declined by
3.1%, while Sun Pharma’s share faced some volatility but closed with a decent gain
of 2.7%.”
• Ranbaxy’s share is evenly placed based on the merger ratio and no further gains are
likely to accrue to its shareholders. Mostly, It will be traded between range of INR
440-470.
• I think they should hold on to their investments given the synergies and the positive
emanating the deal.
• Sun pharma can be dilute earning. There is a possibility that it can reduce their EPS
in near term.
• But hopefully, Good for long term investment.
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15. The Caveats
• Sun’s management board has indicated a revenue contribution of INR 1,527 Cr by
the third year after the close of transaction, that is by 2017, assuming the
transaction gets completed by the end of 2014.
• Any delay in resolving USFDA issue could delay the realisation of synergies and
can potentially affect the launch of new products in the regulated markets.
• Integration of the two different work culture and make it as a one platform will be
the big challenge.
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16. References
• www.ranbaxy.com
• www.sunpharma.com
• www.moneycontrol.com
• www.economictimes.com
• www.business-standard.com

17. “Choose to be Optimistic,It feels Better”
Thank You