Daiichi-Sankyo Moves to Acquire Majority Stake in Ranbaxy

Under the terms of the deal between the two companies, Daiichi-Sankyo will purchase the 34.8% stake in Ranbaxy owned by the Singh family and will seek to acquire a further 20% stake in the company at a price of 737 rupees (US$17.19) per share, which represents a 31.4% premium on yesterday's closing share price. The total transaction value is expected to be between US$3.4 billion and US$4.6 billion, which would value Ranbaxy at US$8.5 billion. Daiichi-Sankyo will finance the deal through a mix of bank loans and cash.

Malvinder Singh will continue in his current position as CEO and managing director, and will also assume the position as chairman of the board of the Indian company.

The acquisition has been unanimously approved by both companies' boards of directors. However, the closing of the deal is subject to the approval of Ranbaxy shareholders and to customary regulatory and statutory approvals. Completion is expected by the end of March 2009, and would entail Ranbaxy becoming a subsidiary of Daiichi-Sankyo.

In light of the forthcoming takeover, Ranbaxy announced today that it would not proceed with its plans to split its R&D operations into a separate subsidiary, Ranbaxy Life Science Research Ltd (see India: 20 February 2008: Ranbaxy Gets Board Approval for R&D Unit Split).

Outlook and Implications

Daiichi-Sankyo's planned acquisition of Ranbaxy represents the latest in a succession of major overseas acquisitions by Japanese companies, following Takeda's US$8.8-billion acquisition of Millennium and Eisai's US$3.9-billion acquisition of MGI Pharma. However, both of these biotechs operated at the high-value end of the market, and had particular strengths in the field of oncology.

Although Daiichi-Sankyo remains committed to strengthening its drug development capabilities—as evidenced by its recent US$234-million acquisition of German biotech U3 Pharma (see Japan: 21 May 2008: Daiichi-Sankyo Snaps Up German Biotech U3 Pharma)—the company intends to marry this with considerable strength in the generics market, while the tie-up with Ranbaxy also significantly extends its reach in both mature and emerging markets. The Indian company's sales were up 15% in the first quarter of 2008, with emerging markets accounting for 53% of sales (see India: 23 April 2008: Ranbaxy Makes Promising Start to 2008 with 19% Profit Growth).

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