Ranbaxy Daiichi

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Ranbaxy – Daiichi Sankyo Deal
Akash Bangani Dipika Bhura Gaurav Khetan Neetu Rathod 12065 12077 12082 12118

Agenda
• • • • • • • • • • Industry Overview Companies’ Profiles Snapshot of the deal Financing the deal Benefits to Daiichi Benefits to Ranbaxy Synergies Post Acquisition challenges Recent Developments Conclusion

Indian Pharmaceutical Industry
• Present size of $14 billion. • Ranks 4th in world in terms of production and 13th in terms of consumption. • Highly fragmented. 325 large and medium-scale companies and 26000 small-scale companies. • Can be divided in 2 segments – Formulation and Bulk Drugs Market Share of segments 20% 80% Formulations Bulk Drugs

Porter’s 5 forces
Threat of Entry: MODERATE

Competition: HIGH

Porter’s 5 forces Model

Threat of substitute: LOW

Bargaining power of customers: MODERATE

Bargaining power of suppliers: LOW

Company Profile: Ranbaxy
• Incorporated in 1961. • The largest pharmaceutical company in India and among the top 100 pharmaceuticals companies in the world. • Ranked 8th largest generic drug company in the world. • Ground operations in 49 countries and manufacturing operations in 11 countries. • Exports contribute to around 80% of total revenues. • 2008-Global Sales of US $ 1,682 Million

Market Reach & structure: Ranbaxy
Shareholding before Deal
Revenue Diversification REGION North America Europe SHARE 26% 23% Category Promoters Domestic Institutions FII’s Holding 34.8% 23.3% 18%

India
Emerging Markets Developed Markets

21%
54% 40%

Shareholding after Deal Category Daiichi Sankyo Rest Holding 64% 36%

Others

6%

About Daiichi - Sankyo
• Established in 2005 , after the merger of two leading companies in Japan- Sankyo Company Ltd. & Daiichi Pharmaceutical Company Ltd. • Proprietary researched based pharmaceutical company. • Sales Splits: Japan – 68% North America – 20% Europe – 9% Other – 3%

Daiichi – Sankyo (Current Data)

Snapshot of the deal
• On June 11, 2008 Daiichi agreed to pay $4.6 billion for acquiring 51% stake in Ranbaxy putting the total enterprise value of Ranbaxy at $8.5 billion. • Deal financing through a mix of debt and existing cash resources of Daiichi Sankyo. • The purchase price of Rs. 737 represents a premium of above 50% to Ranbaxy’s average daily closing price on the National Stock Exchange. • Deal would make the combined entity 15th largest pharmaceutical company in the world.

Acquisition of Shares
Date of Acquisition Oct 15th 2008 Oct 20th 2008 Oct 20th 2008 Particulars Open offer Preferential Share Promoters No. of Shares 92,519,126 46,258,063 81,913,234

Nov 7th 2008

Promoters
TOTAL

48,020,900
268,711,323

•Issue of warrants which could be converted into equity shares between 6 to 18 months.

3000 2980 2960 Stock Price in Yen

Daiichi
12th, 2980 11th, 2975

2940
2920

16th, 2945 18th, 2935 17th, 2930 13th, 2910

2900 2880 2860
9th, 2850

2840
2820 0 2

10th, 2835

4

6

8

10

Ranbaxy
610
600 590 580 Stock Price 570 560 550 540
12th, 543.5 10th, 560.75 11th, 560.8 13th, 566.9 17th, 581.45 16th, 567.75 18th, 598.2

530
520 0

9th, 526.4

2

4

6

8

10

Financing the Deal
• Daiichi was to finance 50% through bank borrowings. • Less amount of debt in the Balance Sheet was an added advantage to the Co. in securing loans to fund the deal. • Remaining 50% funded through internal financial resources ▫ Ample liquidity to finance the deal.

Total Retained Earnings= $ 10.26 bn Marketable securities = $5.26 bn Cash = $ 473.35 mn & Investments = $ 2.16 bn

As on march, 2008

Triggering Factors of the Deal
• Changing dynamics of the global pharmaceutical business • Increasing population • Government’s increasing focus on Healthcare. • Patents reaching expiration • Changing consumer trends • Amendment in Patent Act, 2005

Patent Expiration worldwide

What Daiichi gets from the deal
• Promoters' 34.8% stake and total of...
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