FIPB approves Daiichi-Ranbaxy deal

New Delhi: Amid the ongoing open offer by Daiichi Sankyo to acquire an additional 20 per cent stake in Ranbaxy Laboratories, the Foreign Investment Promotion Board (FIPB) approved the Daiichi-Ranbaxy deal entailing an FDI inflow of Rs 21,560 crore, but recommended that the proposal be now placed before the Cabinet Committee on Economic Affairs, as it exceeded Rs 600 crore.

The matter is likely to come up before the CCEA in the coming weeks sources said but did not give a specific date. However, Daiichi Sankyo’s open offer (for additional stake in the Indian drug maker) which opened August 16 is scheduled to close on September 4. As per the schedule of activities announced by the company, the date of communicating rejection or acceptance and the payment of consideration for accepted shares has been fixed for September 19. When contacted, a Ranbaxy official said the move would not have any impact on the open offer.

FIPB, had approved the deal on July 29, but took it up again today as it had to re-calculate the amount of foreign direct investment from the acquisition.

The acquisition would lead to a foreign direct investment of Rs 21,560 crore, and not Rs 104 crore as the board had earlier approved, sources said adding that the clearances now were a “technical issue”.

According to the Indian laws, FDI exceeding Rs 600 crore needs to be submitted for consideration and approval of the CCEA. The proposal also involves Press Note 1 (2005 series).

In June this year, the Japanese company had announced it would buy 34.81 per cent stake in Ranbaxy held by the Singh family, and also acquire up to 9.21 crore shares at Rs 737 each through the open offer. Daiichi Sankyo would further acquire 9.5 per cent through preferential allotment of equity shares and another 4.5 per cent through share warrants to be issued on a preferential basis (2.38 crore warrants – exercisable between 6-18 months from the date of allotment, for one fully paid-up equity share of Rs 5 each at price of Rs 737, being the price higher than price determined by SEBI guidelines).

Following this, Daiichi Sankyo’s stake in Ranbaxy could go up to 58 per cent. The entire deal is valued at $3.4-4.6 billion.