NEW DELHI—In a deal touted as the largest transaction of its kind in Indian history, Japan's Daiichi Sankyo Co. announced June 11 it will enter the generic drug market by buying a controlling stake in India's Ranbaxy Laboratories Ltd., for up to $4.6 billion.
Daiichi, Japan's third-largest drug maker, said it will purchase the 35 percent stake held by the Singh family, which controls Ranbaxy, for 737 rupees per share and make an open share offer to bring its holding to 51.1 percent. The total transaction is valued between $3.4 and $4.6 billion. On the post-closing basis, the transaction would value Ranbaxy at $8.5 billion.
Amid media reports and market speculation that Pfizer Inc. would make a counterbid for Ranbaxy, Daiichi says it is prepared to make an open offer for an additional 20 percent stake. However, Pfizer has not stated that it is considering a counterbid, even after Ranbaxy agreed to delay marketing a generic version of Pfizer's Lipitor in the U.S. until 2011, protecting $12 billion in sales for Pfizer. Daiichi's open offer starts Aug. 8 and closes Aug. 27.
Upon expected completion of the transaction in March 2009, Ranbaxy is expected to become a subsidiary of Daiichi. Malvinder Singh will continue to lead Ranbaxy as its CEO and managing director while additionally assuming the position of chairman of the board.
In a joint press conference, the companies said Ranbaxy will become debt-free as a result of the deal, enabling it to grow organically and handle the generic side of the business. Daiichi, which said it looked at the Indian market but focused exclusively on Ranbaxy, will continue to operate its brand-name business.
Both companies said in a joint statement that the transaction will create long-term stakeholder value by creating sustainable growth through diversification of business and expanding its global reach. In addition, the companies said they expect to see cost savings through the use of both companies' R&D and manufacturing facilities, especially those in India.
Daiichi executives say the acquisition—the latest in a string of large international acquisitions by Japanese drug makers—will enable it to become the number one generics maker in Japan, where non-branded drugs account for only five percent of the market. The transaction is expected to catapult Daiichi from the twenty-second largest drug maker in the world to fifteenth. It will allow Daiichi to double its global reach from 21 countries to 56 and expand its business in emerging markets such as India, China, Russia and Brazil.
"The proposed transaction is in line with our goal to be a global pharma innovator and provides the opportunity to complement our strong presence in innovation with a new, strong presence in the fast growing business of non-proprietary pharmaceuticals," says Takashi Shoda, Daiichi president & CEO. "This complementary combination represents a perfect strategic fit and delivers a considerable opportunity for the future growth of the new Daiichi Sankyo Group."
Although the transaction is the first time a major successful Indian company has agreed to sell control to a foreign company, Ranbaxy has recently attempted to get into the brand-name business with research collaborations with large pharmas, including Merck and GlaxoSmithKline. Singh says the acquisition puts Ranbaxy on "a new and much stronger platform to harness our capabilities in drug development, manufacturing and global reach."
"Together with our pool of scientific, technical and managerial resources and talent, we would enter a new orbit to chart a higher trajectory of sustainable growth in the medium and long term in the developed and emerging markets organically and inorganically," Singh says. "This is a significant milestone in our mission of becoming a research-based international pharmaceutical company." DDN