RaipurLive.com

Singhs Exit Country’s No. 1 Pharma Firm In Biggest Sellout By Indian Promoters.

At a time when Indian companies are on an acquisition spree abroad, this seems like a goal that’s been scored against the run of play. In a blockbuster deal worth up to $4.6 billion (about Rs 15,000 crore), Ranbaxy Laboratories, the country’s largest pharma company and till not very long ago the pride of India Inc, will become a subsidiary of Daiichi Sankyo of Japan.
The promoters of Ranbaxy, Malvinder Singh and family, will sell their entire stake of almost 34.8% for Rs 10,000 crore. This is the biggest sell-out by any Indian promoter to a foreign company although CEO and MD Malvinder Singh, who will retain his role as CEO post-sale and also be made the chairman, insisted it was a “strategic deal” and not a “sellout”.
The deal values Ranbaxy at about $8.5 billion (Rs 36,000 crore) and makes Daiichi the world’s 15th largest pharma company.
Daichii, Japan’s second-largest drugmaker, will hold a minimum of 50.1% in Ranbaxy through the purchase of the promoter stake and an open offer to shareholders of up to 20% (under takeover rules) at Rs 737 per share, which is about 31% higher than the company’s closing price on Wednesday. Daiichi will also be allotted convertible warrants which it will have the option of converting into equity shares. But it will not do so if it ends up with an equity holding exceeding 50.1%.
The acquisition of Ranbaxy puts Daiichi, a branded drugmaker, in the top 10 in the $120 billion generic drug market, which is growing twice as fast as branded medicines. Generics are expected to play a pivotal role in accessing rapidly growing emerging markets, playing into the hands of Indian companies like Ranbaxy that have great expertise in developing cheap versions of medicines that are no longer covered by patents.
Daiichi is following a strategy similar to that of multinational pharma giants such as Johnson & Johnson and Novartis in trying to diversify into generics and beat the slowdown in branded products. Importantly, it also gives Daiichi operations in 60 countries instead of 21 at present.
“For us, it has certainly been a very emotional decision,” Malvinder, 35, said at a press conference in New Delhi. “Ranbaxy is my life, my blood. We explored a series of options, and at the end of it, we believed this was in the best interests of the company, the shareholders and the employees.”
So why did the Singhs opt to exit? Industry watchers point out that there were many problems on the horizon.
Ranbaxy has debt of almost $600 million on its books. In some cases, the shares of the promoters have been pledged as collateral. The repayment of foreign currency convertible bonds was hanging over its head, which would have resulted into a huge payout in two years.