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Case Study of Ranbaxy for Mergers and Acquisitions

The Sixth Largest Deal of India after:CompaniesTATA Steel - Corus Vodafone Hutchison Essar RNRL - RPower Bharti - Zain HINDALCO - Novelis

Deal Worth$ 12.2 Billion $ 11.1 Billion $ 11.0 Billion $ 10.7 Billion $ 6.0 Billion

Ranbaxy Laboratories Limited (Ranbaxy), India's largest pharmaceutical company, producing a wide range of quality, affordable generic medicines. Ranbaxy today has a presence in 23 of the top 25 pharmaceutical markets of the world. The Company has a global footprint in 46 countries, world-class manufacturing facilities in 7 countries and serves customers in over 125 countries.

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a combined word from the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir Singh and Gurbax Singh. After Bhai Mohan Singh's son Parvinder Singh joined the company in 1967, the company saw a significant transformation in its business and scale. His sons Malvinder Mohan Singh and Shivinder Mohan Singh sold the company to the Japanese company Daiichi Sankyo in June 2008.

Ranbaxy was incorporated in 1961 and went public in 1973. For the year 2009, the Company recorded Global Sales of US $ 1,519 Mn. The Company has a balanced mix of revenues from emerging and developed markets that contribute 54% and 39% respectively. In 2009, North America, the Company's largest market contributed sales of US $ 397 Mn, followed by Europe garnering US $ 269 Mn and Asia clocking sales of around US $ 441 Mn.

Ranbaxy is focused on increasing the momentum in the generics business in its key markets through organic and inorganic growth routes. Ranbaxy has forayed into high growth potential segments like Biologics, Oncology and Injectables. These new growth areas will add significant depth to the existing product pipeline. A first-of-its-kind world class R&D centre was commissioned in 1994. Today, the Company's four multi-disciplinary R&D centers at Gurgaon, house dedicated facilities for generics research and innovative research.

Daiichi Sankyo Co. Ltd. is a Japan-based major pharmaceutical company, which ranked number 22 in the world in sales. Daiichi Sankyo was established in 2005 through the merger of Sankyo Co. Ltd. and Daiichi Pharmaceutical Co. Ltd., which were century-old pharmaceutical companies based in Japan. In 2006, Daiichi Sankyo acquired Zepharma, the OTC drugs unit of Astellas Pharma. On June 10, 2008, Daiichi Sankyo agreed to take a majority (35%) stake in Indian generic drug maker Ranbaxy, with a deal valued at about $4.6 billion. Ranbaxy's Malvinder Singh will remain CEO after the transaction. In June 2008, the company expressed intent to acquire U3 Pharma, which would contribute a therapeutic antiHER3 antibody to the company's anticancer portfolio.

Daiichi acquired a controlling stake i.e. 50.1% in Ranbaxy for $ 4.6 billion. Singh family sold entire stake of 34.8% for Rs 10,000 crore ($2.4 bn ) at Rs 737 per Share. Japanese company picked up another 9.4% in Ranbaxy through preferential allotment. Daiichi made an open offer to acquire 20% more from other share holders. Japanese company can acquire another 4.9% through preferential issue of share warrants. Ranbaxy to get $1 Billion via preferential allotment. Funds to be used to retire debt.

Daiichi Sankyos focus was to develop new drugs to fill the gaps and take advantage of Both Daiichi Sankyo and Ranbaxys strong areas. To overcome current challenges in cost structure and supply chain. To take advantage of Daiichi Sankyos strength in striking lucrative alliance and to establish other pharmaceutical companies.

To develop management framework and expedite synergies. To free up Ranbaxys debt and impart more flexibility in its growth plans. To elevate Daiichis position from 22 to 5th rank in terms of market capitalization.

Improved product quality. Additional revenues through market expansion. Daiichis distinct edge in R&D.

Expansion of market. Cost reduction. Synergy in IT & management.

supply

chain

MARKETING INTEGRATION

R&D INTEGRATION

POST DEAL EFFECTS

NEW PRODUCT LAUNCHES

RUMOURS

Ranbaxy has introduced some of Daiichis products in India, Romania & in 6 African countries. In another year Ranbaxy will introduce some of Daiichis 20 products in the market.

Daiichi may use Ranbaxys manufacturing facilities which would bring down Daiichis R&D expenses substantially and Ranbaxys 200 scientists will get a chance to support Daiichis research effort. As a result they may manufacture active pharmaceutical ingredients and later finished products. Ranbaxys New Drug Discovery Research (NDDR) has been transferred to Daiichi Sankyo India Pharma Private Limited as part of the strategy to strengthen the global Research and Development (R&D) structure of the Daiichi Sankyo Group. By incorporating NDDR into the global Research function, the Group would benefit from more efficient global R&D, as also achieve quicker results.

Valtrex, a GSK product was launched by Ranbaxy. In U.S. the drug promises to increase the sale upward of to $ 200 million. Ranbaxy has launched a generic version of Prasugrel in India by the name of Prasita. Prasita is solely marketed by Ranbaxy in India. Olvance ,an antihypertensive originally discovered by Daiichi Sankyo. The next in line is german firms Flomax.

There is a rumor that Japanese promoters want to delist Ranbaxy to get full control over Ranbaxy and will not be answerable to external shareholders for its action.

By:

Darshan Jindal Gunjan Kapoor Karan Gupta Neha Mittal Shikha Shruti Gupta Shubham Sharma