Presented To:

An acquisition, also known as a

takeover, is the buying of one
company (the ‘target’) by another.
There is no exchange or
consolidation of the company.
There are two types of acquisition:
a)HOSTILE
b)FRIENDLY
 Corporate
Profile:
• Established in 1937 by
Ranjit Singh and Gurbax
Singh
• India’s largest
pharmaceutical company
• Ranked among world’s top
10 generic company
• It has a presence in 23 of
world’s top 25
pharmaceutical market
 Corporate
Profile…
• Having manufacturing
facilities in 11 countries.
• Annual Sales in FY’07:
US$ 1.6 Bn
• Work Force: 12,000
comprising of 50
nationalities.
• The company has a vision
to become one of the top
5 generic companies in
 2006 Ranbaxy Acquired Unbranded
Generic Business Of GSK In Italy
And Spain
2003 Receives The Economic Times
Award For Corporate Excellence For
‘The Company Of The Year 2002-03’

1998 Ranbaxy Enters USA Worlds Largest

Pharma Market, With Products Under Own
Name
1995 Acquisition Of Ohm Laboratories In Us

1992 Company Enters Into An Agreement To Setup A

Joint Venture In China Ranbaxy Ltd.

1985 Ranbaxy Research Foundation Is Established

1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup

1961 Company Incorporate

 STRENGTHs of ranbaxy
 Cost effective technology

 Drug delivery system management

 Production of generic drugs

 Pharmaceutical ingredients ( apis) future growth drivers

Formation of Daiichi Sankyo

2005
 HISTORY OF DAIICHI-
SANKYO
DAIICHI SANKYO

• 1915 Arsemin Shokai, • 1899 SANKYO Shoten, SANKYO’s

predecessor company,
DAIICHI’s predecessor established in Japan
company, established in • 1985 SANKYO establishes SANKYO Europe
Japan in Düs Germany

• 1982 DAIICHI establishes • 2002 Acquisition of Laboratories

Fornet S.A., France
its US subsidiary in New
York
• 2004 Daiichi establishes
DAIICHI
Medical Research, INC.in
the2005
United DAIICHI
States AND SANKYO
ANNOUNCE IN FEBRUARY
 DAIICHI-SANKYO COMPANY
LIMITED
• Established in Sept. 28th 2005.(JAPAN)
• CEO :TAKASHI SHODA
• Workforce : 16,237 People.
• Major Industry : Ethical Drug
Manufactures.
•Annual Sales in FY’07: US$ 8.7 Bn
 MISSION
“TO CONTRIBUTE
TO THE
ENRICHMENT OF QUALITY OF
LIFE AROUND THE WORLD
THROUGH THE CREATION &
PROVISION OF INNOVATIVE
PHARMACEUTICALS.”
 STRENGTHS OF DAIICHI-
SANKYO
• Japan’s second largest drug maker
company

•Ranked 22nd drug maker in the world

• Providing a stable supply of top-

quality pharmaceutical
products
Rationale of the deal
 Shareholding Pattern of
Ranbaxy Laboratories Ltd.
• Daiichi-Sankyo acquired 34.8% stake in
Ranbaxy on 11th June, 2008
• It will make an open offer to the
Ranbaxy shareholders for another 20%
• It will pick up another 9.4% through
preferential allotment
• It was an all cash transaction
• Size of the deal: US$3.4-4.6 Bn
• Deal values Ranbaxy at US $ 8.5
How did Daiichi-Sankyo acquire
Ranbaxy?
 How much did Daiichi-Sankyo pay?
Nature of transaction Acquisition consideration (in million
yens)

Open market share purchases 169,407

Share purchases from founding 230,970

Gain of promoters
family

Share purchases by issuance of Money infused in 85,001

new shares Ranbaxy’s balance
sheet
Direct acquisition related 2,974
expenditures

Total 488,354
 How did Daiichi-Sankyo value
Ranbaxy?
Assets and Liabilities Value attributed (Yen
billions)
Book value of assets and liabilities 78.8
(Cash, Inventory etc.)
Inventories 2.0
(Increase in inventories to fair value)
Tangible assets (Land) 10.0

Intangible assets (Leasehold land) 5.9

Intangible assets (Increase in current products, 41.0

etc. to fair value)
In-process R&D expenses 6.9

Deferred tax liability (20.0)

Minority Interests (45.0)
83.69
Goodwill 408.7 %
Total consideration 488.3
 Valuation of Ranbaxy Laboratories Ltd.
Price paid per share by Daiichi Rs.737
52 week high / low as on 11th June 2008 for Rs. 593 / 300
Ranbaxy share
Valuation of 63.92% stake by Daiichi 19804 crores
Valuation of 100% equity of Ranbaxy as per 30982 crores
the deal
Enterprise valuation of Ranbaxy (on a fully $ 8.5 billion
diluted basis)
Market capitalization of Ranbaxy as on 30th 10434 crores
May 2009 (conclusion of deal)

Global down turn due to the financial crisis has made Daiichi take a
huge hit on its balance sheet due to the acquisition of Ranbaxy.
 Impact of Ranbaxy deal on Daiichi-Sankyo
Balance Sheet
In Yens Reason
billion
Net profit / (loss) for 97.6 Recording of ¥351.3 billion in
Daiichi-Sankyo in FY2008 extraordinary losses due to a one-
time write-down of goodwill
pertaining to the
Net profit / (loss) for (215.5)
investment in Ranbaxy.
Daiichi-Sankyo in FY2009

Net cash used in 49.4 It is due to the cash acquisitions of

investing activities in
FY2008
Net cash used in
investing activities in
FY2009
Short term bank loans
in FY2008
Short term bank loans
shares in U3 Pharma and Ranbaxy,
which entailed cash outgos.
413.8
0.1 Borrowings for the acquisition of
Ranbaxy's share ¥ +240.0 billion
264.3 Increase by consolidation of
Ranbaxy
 Impact of Ranbaxy deal on
Daiichi’s Balance
In Yens
Sheet
Reason
(billion)
Loss on valuation of 0.7 Consolidation of Ranbaxy: ¥ +14.8
derivatives in FY 2008 billion

Loss on valuation of 20.5

derivatives in FY 2009

Foreign exchange 0 Consolidation of Ranbaxy: ¥ -10.6

losses in FY 2008 billion
Foreign exchange 17.5
losses in FY 2008
Purchases of 0.8 Acquisition of Ranbaxy: ¥387.0 billion
investments in
consolidated
subsidiaries in FY 2008

Purchases of 411.3
 Financing of Deal
• Daiichi-Sankyo funded the acquisition
through debt and existing cash reserves.
• Daiichi-Sankyo has a taken a short and
long term loans of 240 billion yens.
• That’s almost 50% of the total funding
requirement of the deal.
 US FDA Invocation on Ranbaxy
• In September 2008, the U.S. FDA issued a warning letter that
Ranbaxy’s production facilities in India at Paonta Sahib and
Dewas were in violation of U.S. current Good Manufacturing
Practice.
• It placed a ban on the importation of any products for the U.S.
market from these two facilities.
• In February 2009, the FDA invoked its Application Integrity
Policy (AIP) against the Paonta Sahib facility. An AIP is
invoked when questions arise concerning the integrity and
reliability of data in drug applications, and it requires the
facility where the relevant data were obtained to re-apply for
approval or to withdraw the application.
 Risks in the deal for
Daiichi-Sankyo
• Ranbaxy’s exposure to the US dollar.

• US FDA invocation may affect overall business in

the country.

• The anticipated synergies may fail to realize if

Ranbaxy faces regulatory hurdles world over.
 Post Acquisition
Objectives
• To develop new drugs to fill the gaps and
take advantage of Ranbaxy’s strong
areas.

• To overcome its current challenges in cost

structure and supply chain.

• To match the competitor's strategy

 BENEFITS TO RANBAXY
AFTER MERGER
 Company will become one of the top 5 in

generic business.

 Access to Daiichi advanced R & D

 Access to Japanese drug market

 Infusion of an additional $ 1 billion into
the company.
 Surplus cash of Rs.3,000 crore used for
acquisition in generic place.
 Promoted as Independent generic arm of
the company.
 BENEFITS TO DAIICHI
SANKYO AFTER MERGER

 Strengthen the position of the company

 Faces intense competition from generics

in it’s home market
 Acquisition will provide low cost
manufacturing

 Market access to over 60 countries

 Ranbaxy-Daiichi

will be the 15th largest drug maker in the

world
with the market capitalization of $ 30 Bn.
EFFECT OF THE DEAL ON
STOCK MARKET
Expectation was near
around Rs. 737 per
share

Ranbaxy fell 3 % to Rs.

543 on the BSE.
 Three Main Reasons:
• Low acceptance ratio

• Capital gains tax will have to be paid on share through

open offer.

• Market are not affected even if 30 % dilution in equity.

DISADVANTAGE
FOR INDIAN
PHARMA.
INDUSTRY
 •

• www.ranbaxy.co.in

• www. daiichisankyo.com

• www.moneycontrol.com