India's #1 Sun Pharma becomes world's #5 Pharmaceutical Firm acquiring Ranybaxy Laboratories

[Chanakya's_Chant]

Sun Pharma to pay $3.2 billion for Ranbaxy, will be world No. 5

India’s most valuable pharmaceutical company, Sun Pharma, has agreed to buy Ranbaxy Laboratories, plagued with multiple product quality issues, from Japan’s Daiichi Sankyo in an all-share transaction totalling $3.2 billion.​

MUMBAI: India's most valuable pharmaceutical company, Sun Pharma, has agreed to buy Ranbaxy Laboratories, plagued with multiple product quality issues, from Japan's Daiichi Sankyo in an all-share transaction totalling $3.2 billion.

The purchase—the biggest pharma sector deal in the Asia-Pacific region this year—will provide a much-needed exit to Daiichi, which has been bogged down by Ranbaxy's regulatory woes and huge losses. By paying only a "reasonable valuation'',Sun Pharma would become the leader in the fast-growing Rs 78,000 crore Indian domestic market with a share of over 9%, overtaking its closest rival Abbott's 6.5% share.

The merged entity will also create the world's fifth-largest generic company with a turnover of $4.2 billion, with a well-diversified portfolio of speciality generics and mass market products. The deal will need approval of 75% shareholders each of Sun Pharma and Ranbaxy. Both Daiichi Sankyo and the promoters of Sun Pharma have agreed to vote in favour of the deal.

Analysts termed it as a "distress sale'' since Daiichi agreed to sell its stake at a nearly 40% discount to what it had paid in 2008 to buy it.

In a unique all-stock deal which involves no cash outgo, Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each Ranbaxy share they own. The exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014, said a company statement.

The Sun Pharma scrip closed at Rs 587.75, nearly 2.7% up, while the Ranbaxy scrip lost 3.12% to close at Rs 445 on the BSE on Monday.

Faced with prolonged US regulatory issues resulting in a ban on its four domestic plants, and losses on foreign currency loans, Daiichi was looking to sell the troubled Ranbaxy for a while now. Sun, with its past experience in turning around troubled assets, looks well placed to handle the situation, they said.

Under the deal, the Japanese company will end up with a stake of about 9% in Sun Pharma, valued at about $2 billion, compared with the $4.6 billion it paid for an over 63% stake in Ranbaxy in 2008. The original acquisition cost was Rs 737 per share. Besides, Daiichi also wrote down $3.5 billion in 2009 to cover a drop in the value of its initial investment after regulatory problems in the US, which also resulted in a drastic erosion of its share price. A questionnaire mailed to Daiichi went unanswered.

The transaction, which is expected to close in nine months after securing all regulatory approvals, values Ranbaxy at 2.2 times its $1.8 billion revenues for 2013 or about Rs 457 per share. Post-deal, Daiichi will be Sun Pharma's single largest shareholder after promoter Dilip Shanghvi himself, with a 9% stake and a seat on the company's board.

As part of the deal, Daiichi has also agreed to indemnify Sun Pharma and Ranbaxy for costs and expenses that may arise from the recent US subpoena which Ranbaxy received for the Tonsa facility over quality issues.

Besides the fast-growing Indian market, Ranbaxy's underlying business has "robust growth," and profitability potential, based on which the price Sun is paying for the deal is "justified," Sun Pharma managing director Shanghvi said, adding, "It offers a broad portfolio of ANDAs (abbreviated new drug applications), first-to-file opportunities and the company's entry into the over-the-counter market. In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma's strengths". Shanghvi also said that the combined entity would focus on fixing manufacturing quality issues at Ranbaxy so that facilities currently banned from shipping to the US, the biggest export market for both Ranbaxy and Sun, can resume exports.

The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. The deal is expected to realize $250 million in sales and operating synergies by the third year of its close, said Uday Baldota, senior VP finance, Sun Pharma, adding that the company would continue to monetize the present FTF opportunities (like blockbuster drug Nexium) in the US market. Details of the new management structure will be announced soon, but Sun Pharma's existing chairman, Israel Makov, is expected to head it.

"It's a unique and smart deal with a reasonable multiple, offering good value to Daiichi. Sun Pharma has taken a calculated risk (with Ranbaxy) and hopefully should be able to resolve the regulatory issues and leverage the company's inherent strengths,'' said Sujay Shetty, leader, life sciences at PwC India.

V Krishna Kumar, partner, lifesciences & healthcare at EY, described it as a good fit. "In addition to size/scale benefits, the domestic portfolios of the two companies complement each other well. Sun's domestic portfolio has a bias towards specialties (such as CVS, CNS and Oral Anti-diabetes), while Ranbaxy's domestic portfolio has large primary-care and OTC segments as well," he said.

In the past, MNCs have aggressively chased Indian assets to gain a toehold in the growing domestic market or to acquire a robust pipeline of generic drugs to increase their presence in a highly-fragmented market. Valuations have only got better with each deal, with a substantial upward trend in the purchase prices—the Ranbaxy-Daiichi transaction was done at around four times sales, the $783 million Sanofi-Shantha acquisition at eight times sales, while Abbott bought Piramal at nine times sales three years back.

The proposed transaction has been approved by the boards of Sun Pharma, Ranbaxy and Ranbaxy's controlling shareholder, Daiichi Sankyo, while Ranbaxy's board and Sun Pharma's board have recommended approval of the transaction to their respective shareholders.

Source:- Sun Pharma to pay $3.2 billion for Ranbaxy, will be world No. 5 - The Times of India

 

[Reviewer21]

Sun Pharma to pay $3.2 billion for Ranbaxy, will be world No. 5

India’s most valuable pharmaceutical company, Sun Pharma, has agreed to buy Ranbaxy Laboratories, plagued with multiple product quality issues, from Japan’s Daiichi Sankyo in an all-share transaction totalling $3.2 billion.​

MUMBAI: India's most valuable pharmaceutical company, Sun Pharma, has agreed to buy Ranbaxy Laboratories, plagued with multiple product quality issues, from Japan's Daiichi Sankyo in an all-share transaction totalling $3.2 billion.

The purchase—the biggest pharma sector deal in the Asia-Pacific region this year—will provide a much-needed exit to Daiichi, which has been bogged down by Ranbaxy's regulatory woes and huge losses. By paying only a "reasonable valuation'',Sun Pharma would become the leader in the fast-growing Rs 78,000 crore Indian domestic market with a share of over 9%, overtaking its closest rival Abbott's 6.5% share.

The merged entity will also create the world's fifth-largest generic company with a turnover of $4.2 billion, with a well-diversified portfolio of speciality generics and mass market products. The deal will need approval of 75% shareholders each of Sun Pharma and Ranbaxy. Both Daiichi Sankyo and the promoters of Sun Pharma have agreed to vote in favour of the deal.

Analysts termed it as a "distress sale'' since Daiichi agreed to sell its stake at a nearly 40% discount to what it had paid in 2008 to buy it.

In a unique all-stock deal which involves no cash outgo, Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each Ranbaxy share they own. The exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014, said a company statement.

The Sun Pharma scrip closed at Rs 587.75, nearly 2.7% up, while the Ranbaxy scrip lost 3.12% to close at Rs 445 on the BSE on Monday.

Faced with prolonged US regulatory issues resulting in a ban on its four domestic plants, and losses on foreign currency loans, Daiichi was looking to sell the troubled Ranbaxy for a while now. Sun, with its past experience in turning around troubled assets, looks well placed to handle the situation, they said.

Under the deal, the Japanese company will end up with a stake of about 9% in Sun Pharma, valued at about $2 billion, compared with the $4.6 billion it paid for an over 63% stake in Ranbaxy in 2008. The original acquisition cost was Rs 737 per share. Besides, Daiichi also wrote down $3.5 billion in 2009 to cover a drop in the value of its initial investment after regulatory problems in the US, which also resulted in a drastic erosion of its share price. A questionnaire mailed to Daiichi went unanswered.

The transaction, which is expected to close in nine months after securing all regulatory approvals, values Ranbaxy at 2.2 times its $1.8 billion revenues for 2013 or about Rs 457 per share. Post-deal, Daiichi will be Sun Pharma's single largest shareholder after promoter Dilip Shanghvi himself, with a 9% stake and a seat on the company's board.

As part of the deal, Daiichi has also agreed to indemnify Sun Pharma and Ranbaxy for costs and expenses that may arise from the recent US subpoena which Ranbaxy received for the Tonsa facility over quality issues.

Besides the fast-growing Indian market, Ranbaxy's underlying business has "robust growth," and profitability potential, based on which the price Sun is paying for the deal is "justified," Sun Pharma managing director Shanghvi said, adding, "It offers a broad portfolio of ANDAs (abbreviated new drug applications), first-to-file opportunities and the company's entry into the over-the-counter market. In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma's strengths". Shanghvi also said that the combined entity would focus on fixing manufacturing quality issues at Ranbaxy so that facilities currently banned from shipping to the US, the biggest export market for both Ranbaxy and Sun, can resume exports.

The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. The deal is expected to realize $250 million in sales and operating synergies by the third year of its close, said Uday Baldota, senior VP finance, Sun Pharma, adding that the company would continue to monetize the present FTF opportunities (like blockbuster drug Nexium) in the US market. Details of the new management structure will be announced soon, but Sun Pharma's existing chairman, Israel Makov, is expected to head it.

"It's a unique and smart deal with a reasonable multiple, offering good value to Daiichi. Sun Pharma has taken a calculated risk (with Ranbaxy) and hopefully should be able to resolve the regulatory issues and leverage the company's inherent strengths,'' said Sujay Shetty, leader, life sciences at PwC India.

V Krishna Kumar, partner, lifesciences & healthcare at EY, described it as a good fit. "In addition to size/scale benefits, the domestic portfolios of the two companies complement each other well. Sun's domestic portfolio has a bias towards specialties (such as CVS, CNS and Oral Anti-diabetes), while Ranbaxy's domestic portfolio has large primary-care and OTC segments as well," he said.

In the past, MNCs have aggressively chased Indian assets to gain a toehold in the growing domestic market or to acquire a robust pipeline of generic drugs to increase their presence in a highly-fragmented market. Valuations have only got better with each deal, with a substantial upward trend in the purchase prices—the Ranbaxy-Daiichi transaction was done at around four times sales, the $783 million Sanofi-Shantha acquisition at eight times sales, while Abbott bought Piramal at nine times sales three years back.

The proposed transaction has been approved by the boards of Sun Pharma, Ranbaxy and Ranbaxy's controlling shareholder, Daiichi Sankyo, while Ranbaxy's board and Sun Pharma's board have recommended approval of the transaction to their respective shareholders.

Source:- Sun Pharma to pay $3.2 billion for Ranbaxy, will be world No. 5 - The Times of India

That's Great we are getting our company back

 

[jarves]

That's Great we are getting our company back

Indeed,I thought that Sun Pharnma would also be taken by some foreign company.

 

[Reviewer21]

Indeed,I thought that Sun Pharnma would also be taken by some foreign company.

Bach gye