India’s $1.05 billion Ranbaxy Labs and Japan’s Daiichi Sankyo, have combined to form a global generic powerhouse. Daiichi Sankyo Co, a third largest Japanese pharmaceutical company with revenues of 880 billion yen, has acquired India's number one pharma company Ranbaxy Laboratories for a total consideration of US$ 4.6 billion in cash.
Post-merger, Ranbaxy is valued at $8.5 billion. The company has been bought at a price which was a 32 percent premium over its listed price on June 10, 2008. Mr Malvinder Mohan Singh, Ranbaxy’s CEO and Managing Director will continue to lead the company post-merger. He will also assume charge as the company’s Chairman.
Daiichi will acquire the entire promoters (Singh Family) holding at a price of Rs 737 per share. With this price the total capitalisation of Ranbaxy worked out to 8.5 billion dollars as against the current market capitalisation of 5 billion dollars.
According to analysts the deal will assist to consolidate their presence in the competitive pharma market. Both the companies are investing huge funds in developing R&D products. Ranbaxy recently announced its revenue projections of US$ 5 billion by 2012 and its position among the top 5 global generic companies. Daiichi has projected some what gloomy picture regarding its working in the current year, it is a third largest company in Japan. It is de-merging its non-pharmaceutical business in the separate company to focus on pharma segment.
Daiichi Sankyo and Ranbaxy believe this transaction will create significant long-term value for all stakeholders through:
* A complementary business combination that provides sustainable growth by diversification that spans the full spectrum of the pharmaceutical business;
* An expanded global reach that enables leading market positions in both mature and emerging markets with proprietary and non-proprietary products;
* Strong growth potential by effectively managing opportunities across the full pharmaceutical life-cycle; and
* Cost competitiveness by optimizing usage of R&D and manufacturing facilities of both companies, especially in India.
Considering the challenging conditions prevailing in the global pharmaceutical market, the consolidation activities of pharma players will strengthen their earnings. Once the integration will start functioning, the shareholders will get better returns.
Daiichi Sankyo has recorded consolidated net sales of Yen 880.1 billion (around Rs 35,400 crore) for the year ended March 2007 as against Yen 929.5 billion in the previous year, a de-growth of 5.3 per cent. Its net sales in Japan declined by 10.4 per cent to Yen 598.1 billion and its sales in North America moved down by 7.1 per cent to Yen 177.9 billion. The sales declined mainly due to demerging of its non-pharmaceutical business and changes in fiscal year-end at certain overseas subsidiaries. However, its net income went up by 24.3 per cent to Yen 97.6 billion from Yen 78.5 billion in the previous year.
Daiichi's R&D expenditure reached at Yen 163.4 billion in the fiscal year ended march 2008, down by 4.2 per cent. The ratio of R&D spending to sales was 18.6 per cent. The Group has focused its R&D investments in four designated therapeutic areas viz., thromobotic disorders, malignant neoplasm, diabetes mellitus, and autoimmune disorders/rheumatoid arthritis, where medical demand is higher.