Transcript daiichi sankyo

Presented To:
Mrs. Drashti Shah
PRESENTED BY
GROUP-“H”
05. YOGITA CHHABHAYA
06. TARUNA DALWALA
26. HIRAL MEHTA
55. TASNEEM SUTARWALA
58. VIRAL VAGHANI
An acquisition, also known as a takeover, is
the buying of one company (the ‘target’) by
another. There is no exchange or
consolidation of the company.
There are two types of acquisition:
a) HOSTILE
b) FRIENDLY
-
PERIOD
TARGET
COMPANY
ACQUIRER
DEAL
VALUE
FEB ’07
Hutch-Essar
Vodafone
13.1
JUN’08
Ranbaxy Lab
Daiichi Sankyo
4.6
APR’06
Flextronics
KRR & Vo LP
0.9
JAN’06
Ambuja Cem
Holcim
0.6
AUG’06
Matrix Lab
Mylan Inc
0.5
Deal Value in billion Dollar
-
PERIOD
TARGET
COMPANY
ACQUIRER
DEAL
VALUE
FEB ’07
Hutch-Essar
Vodafone
13.1
JUN’08
Ranbaxy Lab
Daiichi Sankyo
4.6
APR’06
Flextronics
KRR & Vo LP
0.9
JAN’06
Ambuja Cem
Holcim
0.6
AUG’06
Matrix Lab
Mylan Inc
0.5
-k.k.
Corporate Profile:
 Established in 1937 by Ranjit
Singh and Gurbax Singh
 India’s largest pharmaceutical
company
 Ranked among world’s top 10
generic company
 It has a presence in 23 of world’s
top 25 pharmaceutical market
with export in over 125 countries
Corporate Profile…
 Having manufacturing facilities in
11 countries.
 Annual Sales in FY’07:
US$ 1.6 Bn
 Work Force: 12,000 comprising of
50 nationalities.
 The company has a vision to
become one of the top 5 generic
companies in the world
2006 Ranbaxy Acquired Unbranded
Generic Business Of GSK In Italy And Spain
2003 Receives The Economic Times Award For
Corporate Excellence For ‘The Company Of The
Year 2002-03’
1998 Ranbaxy Enters USA Worlds Largest Pharma
Market, With Products Under Own Name
1995 Acquisition Of Ohm Laboratories In Us
1992 Company Enters Into An Agreement To Setup A Joint Venture In
China Ranbaxy Ltd.
1985 Ranbaxy Research Foundation Is Established
1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup
1961 Company Incorporate
STRENGTHs of ranbaxy
 Cost effective technology
 Drug delivery system management
 Production of generic drugs
 Pharmaceutical ingredients ( apis) future
growth drivers
Formation of Daiichi Sankyo
2005
Daiichi Sankyo
Company,
Limited, Japan
Daiichi
Pharmaceutical
Co., Ltd.
Sankyo
Company,
Limited
HISTORY OF DAIICHI-SANKYO
DAIICHI
SANKYO
 1915 Arsemin Shokai, DAIICHI’s  1899 SANKYO Shoten, SANKYO’s
predecessor company, established
in Japan
 1982 DAIICHI establishes its US
subsidiary in New York
 2004 Daiichi establishes DAIICHI
Medical Research, INC.in the
United States
predecessor company,
established in Japan
 1985
SANKYO
establishes
SANKYO Europe in Düs Germany
 2002 Acquisition of Laboratories
Fornet S.A., France
2005 DAIICHI AND SANKYO ANNOUNCE IN
FEBRUARY THEIR AGREEMENT TO MERGE
DAIICHI-SANKYO COMPANY LIMITED
 Established in Sept. 28th 2005.(JAPAN)
 CEO :TAKASHI SHODA
 Workforce : 16,237 People.
 Major Industry : Ethical Drug Manufactures.
 Annual Sales in FY’07: US$ 8.7 Bn
MISSION
“TO CONTRIBUTE
TO
THE
ENRICHMENT OF QUALITY OF LIFE AROUND
THE WORLD THROUGH THE CREATION
PROVISION
OF
PHARMACEUTICALS.”
&
INNOVATIVE
STRENGTHS OF DAIICHI-SANKYO
 Japan’s second largest drug maker company
Ranked 22nd drug maker in the world
 Providing a stable supply of top-quality
pharmaceutical products
Rationale of the deal
Presence in emerging markets for
Daiichi-Sankyo
Entry into non-proprietary drugs for
Daiichi-Sankyo
Geographical diversification
Product Extension
SYNERGY
Realization of sustainable growth
through a complementary business
model
Acceleration of innovative drug
creation by optimizing value chain
efficiency.
Shareholding Pattern of
Ranbaxy Laboratories Ltd.
0.89% 0.00%
1.72%
Daiichi Sankyo
Mutul Funds
12.43%
Banks, Fin. Inst., Ins Co.
5.30%
FIIs
4.16%
Private Corporate Bodies
9.57%
63.92%
Indian Public
Foreign Nationals
2.01%
NRIs/OCBs
As of Dec. 2008
GDRs
 Daiichi-Sankyo acquired 34.8% stake in Ranbaxy





on 11th June, 2008
It will make an open offer to the Ranbaxy
shareholders for another 20%
It will pick up another 9.4% through preferential
allotment
It was an all cash transaction
Size of the deal: US$3.4-4.6 Bn
Deal values Ranbaxy at US $ 8.5
How did Daiichi-Sankyo acquire Ranbaxy?
How much did Daiichi-Sankyo pay?
Nature of transaction
Acquisition consideration (in million
yens)
Open market share purchases
169,407
Share purchases from founding
family
Gain of promoters 230,970
Share purchases by issuance of new Money infused in
Ranbaxy’s balance
shares
sheet
Direct acquisition related
expenditures
Total
85,001
2,974
488,354
How did Daiichi-Sankyo value
Ranbaxy?
Assets and Liabilities
Value attributed (Yen
billions)
Book value of assets and liabilities
(Cash, Inventory etc.)
78.8
Inventories
(Increase in inventories to fair value)
2.0
Tangible assets (Land)
10.0
Intangible assets (Leasehold land)
5.9
Intangible assets (Increase in current products, etc.
to fair value)
41.0
In-process R&D expenses
6.9
Deferred tax liability
(20.0)
Minority Interests
(45.0)
Goodwill
408.7
Total consideration
488.3
83.69 %
Valuation of Ranbaxy Laboratories Ltd.
Price paid per share by Daiichi
Rs.737
52 week high / low as on 11th June 2008 for
Ranbaxy share
Rs. 593 / 300
Valuation of 63.92% stake by Daiichi
19804 crores
Valuation of 100% equity of Ranbaxy as per the 30982 crores
deal
Enterprise valuation of Ranbaxy (on a fully
diluted basis)
$ 8.5 billion
Market capitalization of Ranbaxy as on 30th
May 2009 (conclusion of deal)
10434 crores
Global down turn due to the financial crisis has made Daiichi take a huge hit on its
balance sheet due to the acquisition of Ranbaxy.
Impact of Ranbaxy deal on Daiichi-Sankyo
Balance Sheet
In Yens
billion
Net profit / (loss) for
Daiichi-Sankyo in FY2008
97.6
Net profit / (loss) for
Daiichi-Sankyo in FY2009
(215.5)
Net cash used in investing
activities in FY2008
49.4
Net cash used in investing
activities in FY2009
413.8
Short term bank loans in
FY2008
0.1
Short term bank loans in
FY2009
264.3
Reason
Recording of ¥351.3 billion in
extraordinary losses due to a one-time
write-down of goodwill pertaining to
the
investment in Ranbaxy.
It is due to the cash acquisitions of
shares in U3 Pharma and Ranbaxy,
which entailed cash outgos.
Borrowings for the acquisition of
Ranbaxy's share ¥ +240.0 billion
Increase by consolidation of Ranbaxy
Impact of Ranbaxy deal on
Daiichi’s Balance Sheet
In Yens
(billion)
Reason
Loss on valuation of
derivatives in FY 2008
0.7
Consolidation of Ranbaxy: ¥ +14.8 billion
Loss on valuation of
derivatives in FY 2009
20.5
Foreign exchange
losses in FY 2008
0
Foreign exchange
losses in FY 2008
17.5
Purchases of
investments in
consolidated subsidiaries
in FY 2008
0.8
Purchases of
investments in
consolidated subsidiaries
in FY 2008
411.3
Consolidation of Ranbaxy: ¥ -10.6 billion
Acquisition of Ranbaxy: ¥387.0 billion
Financing of Deal
 Daiichi-Sankyo funded the acquisition through debt
and existing cash reserves.
 Daiichi-Sankyo has a taken a short and long term
loans of 240 billion yens.
 That’s almost 50% of the total funding requirement
of the deal.
US FDA Invocation on Ranbaxy
 In September 2008, the U.S. FDA issued a warning letter that
Ranbaxy’s production facilities in India at Paonta Sahib and
Dewas were in violation of U.S. current Good Manufacturing
Practice.
 It placed a ban on the importation of any products for the U.S.
market from these two facilities.
 In February 2009, the FDA invoked its Application Integrity
Policy (AIP) against the Paonta Sahib facility. An AIP is invoked
when questions arise concerning the integrity and reliability of
data in drug applications, and it requires the facility where the
relevant data were obtained to re-apply for approval or to
withdraw the application.
Risks in the deal for DaiichiSankyo
 Ranbaxy’s exposure to the US dollar.
 US FDA invocation may affect overall business
in the country.
 The anticipated synergies may fail to realize if
Ranbaxy faces regulatory hurdles world over.
Post Acquisition Objectives
•
To develop new drugs to fill the gaps and
take advantage of Ranbaxy’s strong
areas.
•
To overcome its current challenges in cost
structure and supply chain.
•
To match the competitor's strategy
BENEFITS TO RANBAXY AFTER MERGER
 Company will become one of the top 5 in
generic business.
 Access to Daiichi advanced R & D
 Access to Japanese drug market
 Infusion of an additional $ 1 billion into the
company.
 Surplus cash of Rs.3,000 crore used for acquisition in
generic place.
 Promoted as Independent generic arm of the
company.
BENEFITS TO DAIICHI SANKYO
AFTER MERGER
 Strengthen the position of the company
 Faces intense competition from generics in it’s
home market
 Acquisition will provide low cost manufacturing
 Market access to over 60 countries
Ranbaxy-Daiichi
will be the 15th largest drug maker in
the world
with the market capitalization of $ 30
Bn.
EFFECT OF THE DEAL ON STOCK
MARKET
 Expectation was near around
Rs. 737 per share
 Ranbaxy fell 3 % to Rs. 543 on
the BSE.
Three Main Reasons:

Low acceptance ratio
 Capital gains tax will have to be paid on share through open offer.

Market are not affected even if 30 % dilution in equity.
For Daiichi, it was important to have some kind of generic play that
Novartis has with Sandoz, which is the second largest generic company
in the world. Novartis is a USD 30-35 billion company. Maybe Daiichi
at the very start of that graph is trying to do exactly that. They have a
great play in Ranbaxy, which has a manufacturing and research base. It
will also benefit from the cost-competitive advantage and then grow its
business from the two angles