Final MA RANBAXY and Daiichi Sankyo

8/22/2019 Final MA RANBAXY and Daiichi Sankyo

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1 I

NAME OF PRESENTER

COMPANY1

RANBAXY DAIICHI SANKYO


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2 I

NAME OF PRESENTER

COMPANY2

Sr.No. Name Roll No

1. Priyanka Fernandes 15

2. Saurabh hanswal 18

3. Arvind Vishwakarma 56

Group Member


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3 I

NAME OF PRESENTER

Ranbaxy Laboratories Limited

Ranbaxy Laboratories Limited is an Indian Multinational Pharmaceutical Company.

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for

a Japanese company Shionogi.

The Name Ranbaxy Become

Ranbir + Gurbax = Ranbaxy

Mohan Singh bought the company in 1952 from his cousins Ranbir and Gurbax.

The Company was Incorporated on 16th June, 1961 at Delhi. The Company

Manufacture drugs, medicines, cosmetics and chemical products. The company

also markets a wide range of products including a number of life saving

antibiotics.

In October 1973 Ranbaxy Become a public limited company with the public issue

of shares 63535 Equity Share of Rs 10 each at par to public.


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4 I

NAME OF PRESENTER

Conti

Ranbaxy is a member of the Daiichi Sankyo Group. Daiichi Sankyo is a leading

global pharma innovator, headquartered in Tokyo, Japan.

Chairman : Dr Tsutomu Une

CEO & MD : Arun Sawhney

Headquarters : Gurgoan

Employees : More than 14600

Global Presence: Ground operations in 43 countries, products sold in over 150

countries , 8th

in largest in the global general pharmaceuticals

Manufacturing: 16 manufacturing facilities spread across 8 countries


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5 I

NAME OF PRESENTER

Daiichi Sankyo Limited

Daiichi Sankyo Company , Ltd was established in 2005 though the merger of

two leading Japanese Pharmaceutical Companies.

Daiichi Sankyo Company, Limited is a global pharmaceutical Company and

the second largest pharmaceutical company in Japan.

Provide innovative products and services in more than 50 countries around

the world. With more than 100 years of scientific expertise.

Daiichi Sankyo is based in Tokyo and today has 50 billion yen in capital.

22nd Largest in the world

Producer of high quality drugs

Chairman - Takashi Shoda

Employee More than 30000


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6 I

NAME OF PRESENTER

What was the motive of the Deal

Presence in emerging markets for Daiichi-Sankyo (Geographical diversification).

Entry into non-proprietary drugs for Daiichi-Sankyo (Product Extension). To

develop new drugs to fill the gaps and take advantage of Ranbaxys strong

areas.

Realization of sustainable growth through a complementary business model. Toovercome its current challenges in cost structure and supply chain.

Acceleration of innovation drug creation by optimizing value chain efficiency.

The acquisition of Ranbaxy by Daiichi represents a major entry for the Japanese

firm into the high growth business areas of generic drug. The acquisition

shows that global pharma companies are making efforts to cope up with strong

generic drug makers.

To match the competitor's strategy.


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7 I NAME OF PRESENTER

Involved Parties

Daiichi-Sankyo

Nomura Securities Co., Ltd., the Japan headquarteredinvestment bank, acted as the exclusive financial

advisor

Jones Day as the legal advisor outside India

P&A Law Offices as the legal advisor in India

Mehta Partners LLC as the strategic business advisor

and

Ernst & Young as the accounting and tax advisor


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Conti

Ranbaxy Co Ltd

Religare Capital Markets Limited, a wholly owned

subsidiary of Religare Enterprises Limited, is the

exclusive financial advisor to Ranbaxy and the Singh

family.

Vaish Associates are the legal advisors to Ranbaxy

and the Singh family


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Reason for Acquisition

Daiichi Sankyo , Second Largest and an innovator company in Japan wanted to

manufacture low cost generics because of Japan Governments new policy of

helping the aging population by low cost generic Substitution for branded drugs.

Daiichi lack in low-cost expertise and looking for low cost Generics Company.

Daiichi Sankyo and Ranbaxy believe this transaction provides the significant long

term value for all stakeholder though:

A Complementary business Combination i.e. Hybrid business model simple DaiichiSankyo in Proprietary drugs and Ranbaxy in Non- Proprietary drugs.

An Expand Global Reach

Strong Growth potential

Cost competitiveness by optimizing usage of R&D and manufacturing facilities.


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Conti.

Mr Malvinder Singh Say

There was no misleading information. Daiichi came and approached us. There were

a bunch of people who wanted to engage with Ranbaxy. When they came, US FDA

investigations were on.

The R&D pipeline was not delivering enough products, the generic market was not

generating adequate returns.

Ranbaxy had three choice

It Could have spend lots of money in acquiring a big generic company to grow

inorganically.

Merge with a global Player

Sell out

The Sell out option was the most profitable, both for the promoter as well as

shareholder

Daiichi Sankyo is a leading, Research based pharmaceutical company and this deal

would enable Ranbaxy to explore their shared capabilities in drug development.


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Effect on stock Market

The Share Price of Ranbaxy Jump 6.12% From 528.40 to 560.75 on 9 June 2008,

two day before the company announced its Buyout by Daiichi Sankyo.

The Benchmark Sensex down 506 points on same day

June 10 2008 , a day before the deal was announced, the Ranbaxy flat at Rs

560.80 and Sensex fell 177 points.


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Structure and Calculations of Deal

Assets and Liabilities

Value

attributed(Rs Crores)

Book value of assets and liabilities (Cash,Inventory etc.)

3470

Inventories (Increase in inventories to fair value) 88

Tangible assets (Land) 440

Intangible assets (Leasehold land) 260

Intangible assets (Increase in current products,etc. to fair value)

1805

In-process R&D expenses 304

Deferred tax liability -881

Minority Interests -1981

Goodwill 17995

Total consideration 21500 USD 4.5 Billion

USD 4.01 Billion


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Conti.

Current Price (Rs) 2008 561

Deal Price (Rs) 2008 737 ($17) Per share ($1 = Rs 43.35)

Premium 176 Per Share , 31%

Daiichi Stake Shares (Million)

Promoters Stake 130

New Issue to Daiichi 46

Open Offer to expanded capital 85Warrants 23.8

Total Shareholding 285

% Stake 59%

Size of the deal: US$ 4.5 Billion

As per the deal, total value of Ranbaxy was US $ 8.5 Billion.

Exchange Rate are as follow


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Conti

Date of

Acquisition

Particular No. of Share % of

Share

Holding

Value

(in

Crore)

15 Oct,2008 Acquisition of share under open

offer pursuant to Regulation 10

%12 of SEBI Regulation,1997 @

737 per share

9,12,77,598 20 6727

20 Oct,2008 Acquire Share by Preferential

allotment of warrants @ Rs 737

per Share

4,16,22,585 9.12 3068

20 Oct,2008 Acquisition of share from the

promoter of the company @ Rs

737 per share

9,35,13,899 20.49 6892

07 Nov, 2008 Acquisition of share from the

then Promoter of the company

@ Rs.737 per share

6,53,09,121 14.31 4813

Total 29,17,23,203 63.92 21500

USD 4.5 Billion


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Under the deal, Daiichi Sankyo agreed to acquire 34.8 per cent stake for around

Rs. 10,000 crore ($2.4 billion) at Rs. 737 ($17) per share, at a premium of 31%

over the price. (Current price 561 and Deal price is 737) from the promoters Mr

Malvinder Singh and family.

All cash transaction.

Specific nature of the transactionOff Market Transaction Acquisition funded through debt and existing cash reserves.

The deal was financed through a mix of bank debt facilities and existing cash

resources of Daiichi Sankyo.

Daiichi-Sankyo has taken short and long term loans of USD 2.6 billion which is

almost 50% of the total funding requirement of the deal.

Nature of Transaction


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Pre Acquisition Shareholdings Patterns

34.8%

12.43%

5.56%

14.39%

12.42%

20.4%

12%

Shareholding %

Singh Singh's Family Mutual Fund

Bank Insurance Company FII

General Public


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Post Acquisition Shareholdings Patterns

Daiichi Sankyo,

63.92

Mutual Fund,

2.58

Bank, 0.37

Insurance

Company, 9.19

FII, 4.41

General Public,

19.53


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Anticipated Benefits of the Acquisition

15th Largest drug maker in the world

Market Capitalization 30 Billion

Low cost production

On the financial side, the debt goes to zero, Rs 3,000 crore of cash comes

in, the market capitalization goes to $8billion, the net worth goes up


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Daiichi-Sankyo

Strengthen the position of the company.

Acquisition will provide low cost manufacturing.

Market access to over 60 countries .

Ranbaxy Co Ltd

Company will become one of the top 5 in generic business.

Access to Daiichis advanced R & D facilities.

Access to Japanese drug market

Infusion of an additional $ 1 billion into the company. Surplus cash of Rs.3,000 crores flows in.

The market capitalization goes to $8billion & the net worth goes up.

Conti


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The Deal is Beneficiary for both the side

A win-win for Ranbaxy and Daiichi Sankyo.

Competitiveness by optimizing usage of R&D Manufacturing facilities

of both Companies

The Combination of the companies will give Ranbaxy access to

Daiichis expertise in Research while the Japanese company will

benefit from low-cost production on the sub-continent, a deepening

profits crises in Japans drugs industry

Daiichi Sankyo will gain position of major player in Generics.


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Performance and Problem of Ranbaxy After

Acquisition

after the deal was inked, in September 2008, the US drug regulatorFDA

accused Ranbaxy of misrepresenting data and manufacturing deficiencies.

It issued an import ban on Ranbaxy, prohibiting the export of 30 drugs to

the US, within three months after Daiichi announced the acquisition.

Following this, Ranbaxys sales in the US shrank almost by a fourth, and its

stock price slumped to over a fifth of the acquisition price.

It has since taken Ranbaxy four years to reach a settlement with the US

regulatory authorities. The company recently agreed to pay a fine of $500

million after admitting to false representation of data and quality issues atits three Indian plants supplying to the US market. The companys

problems in the US are far from done with. It continues to face challenges

in securing timely approval for its exclusive products in the US markets.

i f f b k


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Last Six Year Performance of Ranbaxy In Stock

market


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2008 2009 2010 2011 2012

Net Worth 4296.25 4343.39 5604.73 2869.39 4084.33

Total Debt 4311.44 3629.52 4334.81 4490.73 4846.19

Net Current Assets 3171.29 2371.94 4576.11 2220.07 3724.85

Balance Sheet 8675.14 8026.25 10004.25 7441.08 9019.47

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Financial Performance


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Acquisition

A corporate action in which a company buys most, if not all, of the targetcompany's ownership stakes in order to assume control of the target firm.

Acquisitions can be either friendly or hostile. Friendly acquisitions occur

when the target firm expresses its agreement to be acquired, whereas

hostile acquisitions don't have the same agreement from the target firmand the acquiring firm needs to actively purchase large stakes of the

target company in order to have a majority stake.

In either case, the acquiring company often offers a premium on the

market price of the target company's shares in order to enticeshareholders to sell. For example, ABC to acquire XYZ was equal to a 65%

premium over the stock's market price.


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Thank You

Documents

Final MA RANBAXY and Daiichi Sankyo