presented to: mrs. drashti shah presented to: mrs. drashti shah
TRANSCRIPT
Presented To:Mrs. Drashti Shah
PRESENTED BYGROUP-“H”
05. YOGITA CHHABHAYA06. TARUNA DALWALA26. HIRAL MEHTA55. TASNEEM SUTARWALA58. VIRAL VAGHANI
An acquisition, also known as a takeover, is the buying of one company (the ‘target’) by another. There is no exchange or consolidation of the company.There are two types of acquisition:a)HOSTILEb)FRIENDLY
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PERIOD TARGET COMPANY
ACQUIRER DEAL VALUE
FEB ’07 Hutch-Essar Vodafone 13.1
JUN’08 Ranbaxy Lab Daiichi Sankyo 4.6
APR’06 Flextronics KRR & Vo LP 0.9
JAN’06 Ambuja Cem Holcim 0.6
AUG’06 Matrix Lab Mylan Inc 0.5
Deal Value in billion Dollar
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PERIOD TARGET COMPANY
ACQUIRER DEAL VALUE
FEB ’07 Hutch-Essar Vodafone 13.1
JUN’08 Ranbaxy Lab Daiichi Sankyo 4.6
APR’06 Flextronics KRR & Vo LP 0.9
JAN’06 Ambuja Cem Holcim 0.6
AUG’06 Matrix Lab Mylan Inc 0.5
Corporate Profile:
Established in 1937 by Ranjit Singh and Gurbax Singh
India’s largest pharmaceutical company
Ranked among world’s top 10 generic company
It has a presence in 23 of world’s top 25 pharmaceutical market with export in over 125 countries
Corporate Profile…
Having manufacturing facilities in 11 countries.
Annual Sales in FY’07: US$ 1.6 Bn Work Force: 12,000
comprising of 50 nationalities.
The company has a vision to become one of the top 5 generic companies in the world
1961 Company Incorporate
1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup
1985 Ranbaxy Research Foundation Is Established
1992 Company Enters Into An Agreement To Setup A Joint Venture In China Ranbaxy Ltd.
1995 Acquisition Of Ohm Laboratories In Us
1998 Ranbaxy Enters USA Worlds Largest Pharma Market, With Products Under Own Name
2003 Receives The Economic Times Award For Corporate Excellence For ‘The Company Of The Year 2002-03’
2006 Ranbaxy Acquired Unbranded Generic Business Of GSK In Italy And Spain
Cost effective technology
Drug delivery system management
Production of generic drugs
Pharmaceutical ingredients ( apis) future growth drivers
STRENGTHs of ranbaxy
Formation of Daiichi Sankyo
2005
HISTORY OF DAIICHI-SANKYODAIICHI SANKYO
1915 Arsemin Shokai, DAIICHI’s predecessor company, established in Japan
1982 DAIICHI establishes its US subsidiary in New York
2004 Daiichi establishes DAIICHI
Medical Research, INC.in the United States2005 DAIICHI AND SANKYO ANNOUNCE IN
FEBRUARY THEIR AGREEMENT TO MERGE
DAIICHI-SANKYO COMPANY
LIMITED Established in Sept. 28th 2005.(JAPAN)
CEO :TAKASHI SHODA
Workforce : 16,237 People.
Major Industry : Ethical Drug
Manufactures.Annual Sales in FY’07: US$ 8.7 Bn
MISSION
“TO CONTRIBUTE
TO THE ENRICHMENT
OF QUALITY OF LIFE AROUND THE
WORLD THROUGH THE CREATION &
PROVISION OF INNOVATIVE
PHARMACEUTICALS.”
STRENGTHS OF DAIICHI-SANKYO
Japan’s second largest drug maker company
Ranked 22nd drug maker in the world
Providing a stable supply of top-quality pharmaceutical products
Rationale of the deal
Shareholding Pattern ofRanbaxy Laboratories Ltd.
Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on 11th June, 2008
It will make an open offer to the Ranbaxy shareholders for another 20%
It will pick up another 9.4% through preferential allotment
It was an all cash transaction Size of the deal: US$3.4-4.6 Bn Deal values Ranbaxy at US $ 8.5
How did Daiichi-Sankyo acquire Ranbaxy?
How much did Daiichi-Sankyo pay?
Nature of transactionNature of transaction Acquisition consideration (in Acquisition consideration (in million yens)million yens)
Open market share purchasesOpen market share purchases 169,407169,407
Share purchases from founding Share purchases from founding familyfamily
230,970230,970
Share purchases by issuance of Share purchases by issuance of new sharesnew shares
85,00185,001
Direct acquisition related Direct acquisition related expendituresexpenditures
2,9742,974
TotalTotal 488,354488,354
Gain of promoters
Money infused inRanbaxy’s balance sheet
How did Daiichi-Sankyo value Ranbaxy?Assets and LiabilitiesAssets and Liabilities Value attributed (Yen Value attributed (Yen
billions)billions)
Book value of assets and liabilitiesBook value of assets and liabilities(Cash, Inventory etc.)(Cash, Inventory etc.)
78.878.8
Inventories Inventories (Increase in inventories to fair value)(Increase in inventories to fair value)
2.02.0
Tangible assets (Land)Tangible assets (Land) 10.010.0
Intangible assets (Leasehold land)Intangible assets (Leasehold land) 5.95.9
Intangible assets (Increase in current Intangible assets (Increase in current products, etc. to fair value)products, etc. to fair value)
41.041.0
In-process R&D expensesIn-process R&D expenses 6.96.9
Deferred tax liabilityDeferred tax liability (20.0)(20.0)
Minority InterestsMinority Interests (45.0)(45.0)
GoodwillGoodwill 408.7408.7
Total considerationTotal consideration 488.3488.3
83.69 %
Valuation of Ranbaxy Laboratories Ltd.
Price paid per share by DaiichiPrice paid per share by Daiichi Rs.737Rs.737
52 week high / low as on 1152 week high / low as on 11thth June 2008 June 2008 for Ranbaxy sharefor Ranbaxy share
Rs. 593 / 300Rs. 593 / 300
Valuation of 63.92% stake by DaiichiValuation of 63.92% stake by Daiichi 19804 crores19804 crores
Valuation of 100% equity of Ranbaxy as Valuation of 100% equity of Ranbaxy as per the dealper the deal
30982 crores30982 crores
Enterprise valuation of Ranbaxy (on a fully Enterprise valuation of Ranbaxy (on a fully diluted basis)diluted basis)
$ 8.5 billion$ 8.5 billion
Market capitalization of Ranbaxy as on Market capitalization of Ranbaxy as on 3030thth May 2009 (conclusion of deal) May 2009 (conclusion of deal)
10434 crores10434 crores
Global down turn due to the financial crisis has made Daiichi take a huge hit on its balance sheet due to the acquisition of Ranbaxy.
Impact of Ranbaxy deal on Daiichi-Sankyo Balance Sheet
In Yens In Yens billionbillion
ReasonReason
Net profit / (loss)Net profit / (loss) for for Daiichi-Sankyo in Daiichi-Sankyo in FY2008FY2008
97.697.6 Recording of ¥351.3 billion in Recording of ¥351.3 billion in extraordinary losses due to a one-extraordinary losses due to a one-time write-down of goodwill time write-down of goodwill pertaining to thepertaining to theinvestment in Ranbaxy.investment in Ranbaxy.
Net profit / (loss) Net profit / (loss) for for Daiichi-Sankyo in Daiichi-Sankyo in FY2009FY2009
(215.5)(215.5)
Net cashNet cash used in used in investing activities in investing activities in FY2008FY2008
49.449.4 It is due to the cash acquisitions of It is due to the cash acquisitions of shares in U3 Pharma and shares in U3 Pharma and Ranbaxy, which entailed cash Ranbaxy, which entailed cash outgos.outgos.Net cashNet cash used in used in
investing activities in investing activities in FY2009FY2009
413.8413.8
Short term bank Short term bank loansloans in FY2008 in FY2008
0.10.1 Borrowings for the acquisition of Borrowings for the acquisition of Ranbaxy's share ¥ +240.0 billionRanbaxy's share ¥ +240.0 billionIncrease by consolidation of Increase by consolidation of RanbaxyRanbaxy
Short term bank Short term bank loansloans in FY2009 in FY2009
264.3264.3
Impact of Ranbaxy deal on Daiichi’s Balance Sheet
In Yens In Yens (billion)(billion)
ReasonReason
Loss on valuation of Loss on valuation of derivatives derivatives in FY in FY 20082008
0.70.7 Consolidation of Ranbaxy: ¥ +14.8 Consolidation of Ranbaxy: ¥ +14.8 billionbillion
Loss on valuation of Loss on valuation of derivatives derivatives in FY in FY 20092009
20.520.5
Foreign exchange Foreign exchange losses losses in FY 2008in FY 2008
00 Consolidation of Ranbaxy: ¥ -10.6 Consolidation of Ranbaxy: ¥ -10.6 billionbillion
Foreign exchange Foreign exchange losses losses in FY 2008in FY 2008
17.517.5
Purchases of Purchases of investments investments in in consolidated consolidated subsidiaries in FY subsidiaries in FY 2008 2008
0.80.8 Acquisition of Ranbaxy: ¥387.0 Acquisition of Ranbaxy: ¥387.0 billionbillion
Purchases of Purchases of investments investments in in consolidated consolidated subsidiaries in FY subsidiaries in FY 20082008
411.3411.3
Financing of Deal
Daiichi-Sankyo funded the acquisition
through debt and existing cash reserves.
Daiichi-Sankyo has a taken a short and
long term loans of 240 billion yens.
That’s almost 50% of the total funding
requirement of the deal.
US FDA Invocation on Ranbaxy
In September 2008, the U.S. FDA issued a warning letter that Ranbaxy’s production facilities in India at Paonta Sahib and Dewas were in violation of U.S. current Good Manufacturing Practice.
It placed a ban on the importation of any products for the U.S. market from these two facilities.
In February 2009, the FDA invoked its Application Integrity Policy (AIP) against the Paonta Sahib facility. An AIP is invoked when questions arise concerning the integrity and reliability of data in drug applications, and it requires the facility where the relevant data were obtained to re-apply for approval or to withdraw the application.
Risks in the deal for Daiichi-Sankyo
Ranbaxy’s exposure to the US dollar.
US FDA invocation may affect overall business in the country.
The anticipated synergies may fail to realize if
Ranbaxy faces regulatory hurdles world over.
Post Acquisition ObjectivesPost Acquisition Objectives
• To develop new drugs to fill the gaps and take advantage of Ranbaxy’s strong areas.
• To overcome its current challenges in cost structure and supply chain.
• To match the competitor's strategy
BENEFITS TO RANBAXY AFTER MERGER
Company will become one of the top 5 in
generic business.
Access to Daiichi advanced R & D
Access to Japanese drug market
Infusion of an additional $ 1 billion into
the company.
Surplus cash of Rs.3,000 crore used for
acquisition in generic place.
Promoted as Independent generic arm of
the company.
BENEFITS TO DAIICHI SANKYO AFTER MERGER
Strengthen the position of the company
Faces intense competition from generics
in it’s home market
Acquisition will provide low cost
manufacturing
Market access to over 60 countries
Ranbaxy-Daiichi
will be the 15th largest drug maker in the worldwith the market capitalization of $ 30 Bn.
EFFECT OF THE DEAL ON STOCK MARKET
Expectation was near around Rs. 737 per share
Ranbaxy fell 3 % to Rs.
543 on the BSE.
Three Main Reasons:
Low acceptance ratio
Capital gains tax will have to be paid on share through
open offer.
Market are not affected even if 30 % dilution in equity.
For Daiichi, it was important to have some kind of generic play that Novartis has with Sandoz, which is the second largest generic company in the world. Novartis is a USD 30-35 billion company. Maybe Daiichi at the very start of that graph is trying to do exactly that. They have a great play in Ranbaxy, which has a manufacturing and research base. It will also benefit from the cost-competitive advantage and then grow its business from the two angles
