Emerging Markets
Ranbaxy buyout heats
up Indian M&A
U
ntil two months before its sell-out “To many, Ranbaxy was a pioneering Dr VVLN Sastry, country head of Firstcall
in June 2008, India’s largest company that could only go from strength to India Equity Advisors – who admits that the
pharmaceutical company, Ranbaxy strength and therefore should have been the Ranbaxy deal was much in advance of
Laboratories, hardly showed any signs of last man standing rather than being the first anybody’s comprehension, and a trendsetter
weakness, let alone its intention to exit. to capitulate in terms of a sell-out. We can – said that generics, though much publicised
In fact, in its familiar, aggressive style of now expect some more exits over the next as the biggest opportunity, come with limited
functioning, Ranbaxy was chasing the five years,” said Sanjiv Kaul, managing director marketing longevity overseas, thus restricting
Chennai-based domestic fi rm, Orchid of India-focused investment firm the earnings cycle to a specific period.
Chemicals & Pharmaceuticals, fl irting dangerously ChrysCapital, and an ex-Ranbaxian. “ANDA challenges are also becoming handy
close to triggering a public offer for Orchid. Dilip G Shah, secretary general of the only in select cases, whereas expenditure on
But on June 11th things changed Indian Pharmaceutical Alliance (IPA) – which their account is substantially increasing for
dramatically and India’s somewhat frothy
represents top domestic companies – and a
companies,” explained Dr Sastry.
M&A scene saw the wily predator turn prey.
former director at Pfizer India, adds that the
About a week or so after the transaction
Ranbaxy’s founding family divested its
deal puts pressure on Indian companies.
with Daiichi Sankyo, Ranbaxy entered into an
controlling stake to Japan’s Daiichi Sankyo,
“There could be unsolicited bids as well as
out-of-court settlement with Pfizer over the
and the Japanese company said that it would
increased temptation on the part of Indian
company’s generic challenge against Pfizer’s
further seek to acquire the majority of the
firms,” Mr Shah said.
lipid-lowering drug, Lipitor (atorvastatin). The
voting capital of Ranbaxy at a price of Rs737 settlement, according to some industry
($17.14) per share, with the total transaction
tough environment?
estimates, could generate potential revenues
value pegged between $3.4 billion and
There are diverse views on what probably
of $1.5 billion over a four-year term for
$4.6 billion. Daiichi Sankyo now controls prompted Ranbaxy’s exit. Was it indicative of Ranbaxy, besides capping the company’s
63.92% of Ranbaxy’s share capital. the tough business environment that litigation costs across markets. Ranbaxy,
Other medium-sized and innovative pharmaceutical companies operate in or was however, declined to confirm the figure on
inbound/outbound deals marked the Indian it simply a smart business decision? potential revenues. The Indian company is
pharmaceutical market in 2008, but none “It’s a tough business environment for estimated to have incurred litigation
generated the kind of frenzy and interest as pharma CEOs globally. Intelligent and innovative expenses of about $25 million in 2007.
Daiichi Sankyo’s acquisition of Ranbaxy. The collaborations across the world are a must to Some senior industry officials dispute the
deal shocked many, raised a plethora of correct the situation which the pharmaceutical tough environment claim, however. They say
questions and set the rumour mills grinding industry finds itself in,” said Tarun Shah of the pharmaceutical industry has always
on the possibilities of similar sell-offs by Mehta Partners, the strategic business advisor operated in a challenging environment and
other large Indian companies. to Daiichi Sankyo in its deal with Ranbaxy. things are not very different now. “We have
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