Japanese firm to buy 51% stake in Ranbaxy

New Delhi: In one of the biggest deals in the pharmaceutical sector, Japan’s second-largest pharmaceutical company Daiichi Sankyo will buy up to 51 per cent stake in Ranbaxy Laboratories at Rs 737 a share.

The value of the transaction is expected to be between $3.4 billion and $4.6 billion taking Ranbaxy’s enterprise value to $8.5 billion compared with $5 billion based on the company’s current share price.

Under the deal, Daiichi Sankyo will acquire 34.8 per cent stake (28 per cent post equity-capital dilution) held by the promoter Mr Malvinder Singh and family, 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. The company will also make an open offer to the public shareholders for acquiring another 20 per cent.

Once the deal is completed, the Singh family will cease to have any stake in the company though Mr Malvinder Singh will continue to lead the pharmaceutical major as its Chief Executive Officer and Managing Director.

Explaining the rationale for the move, Mr Singh said, “The decision was taken in the interest of the future growth prospects of the company, employees and the shareholders.”

Post acquisition, Ranbaxy would become a debt-free firm. The two firms said they plan to keep Ranbaxy a listed entity in India even as it retained the identity and brand.

The combined market capitalisation of both companies would be around $30 billion making it the world’s 15th largest pharmaceutical company. The proposed open-offer price of Rs 737 represents a premium of 53.5 per cent to Ranbaxy’s average daily closing price on the National Stock Exchange for the three months ending June 10, 2008. Ranbaxy’s shares closed at Rs 560 on the Bombay Stock Exchange.

There would be 10 members on the board, of which Ranbaxy will appoint four members including Mr Malvinder Singh.

The transaction is expected to be completed by the end of March 2009. The company has also decided not to pursue the proposed demerger of its New Drug Discovery Research (NDDR) in a bid to synergise the R&D unit with Daiichi Sankyo’s research capabilities. “The proposed transaction is in line with our goal to be a ‘global pharma innovator’ and provides the opportunity to complement our emerging market strategy,” said Mr Takashi Shoda, President & CEO of Daiichi Sankyo Company Ltd.