Pharma Industry

M&A Deals in PHARMA Sector

Group 6

Sumit Kedia

Swarnabha Mukherjee

Surabhi Karsoliya

Tanvi Arora

RANBAXY & DAIICHI DEAL 2008

Ranbaxy was acquired by Daiichi in 2008 by taking up 38.1% stake from the promoters to increase its share to 50.1% in the company. This deal holds a very high significance because it was the biggest Indian deal in the pharmaceuticals sector and huge implications from market point of view and at the same time IPR as well. It also depicts the importance of emerging markets and the major problem that the sector is facing that of huge patent expiry. And the fact that the 2 involved are major players in their respective fields and domains adds greater value.

Transaction Details

Daiichi Sankyo acquired the majority equity stake in Ranbaxy by a combination purchase of shares held by various stakeholder and all the shares/warrants will be acquired/issued at a price of Rs737 per share. This purchase price represents a premium of 53.5% to Ranbaxy’s average daily closing price on the National Stock Exchange for the three months ending on June 10, 2008 and 31.4% to such closing price on June 10, 2008. The transaction will be accretive to Daiichi Sankyo’s EPS.

Market and Stock Performance

The share price of the country’s largest drug maker rose 3.86% to Rs 526.40 on June 9, two days before the company announced its buyout by Daiichi Sankyo although SENSEX plunged 506 points. A day before the deal was announced, the Ranbaxy scrip surged 6.52% and the Sensex fell 177 points.. On deal day, it settled at 567.75 points, up a mere 0.15%. The amount of movement in the stock as well as the period over which speculative positions were built was not large. The graphs shown below depict the same:

Strategic and Synergistic Advantages

The key areas where Daiichi Sankyo and Ranbaxy are synergetic include their respective presence in the developed and emerging markets. While Ranbaxy’s strengths in the 21 emerging generic drug markets can...