Mergers, Acquisitions and Takeovers Case Study

Daiichi’s Acquisition of Ranbaxy

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Abstract:
On June 11th 2008 Japan’s third largest drug maker Daiichi Sankyo announced, its strategic deal to acquire majority stake in the Indian generic drug major, Ranbaxy Laboratories Limited. Daiichi agreed to pay around US$4.2 billion for acquiring 51% stake (including promoter stake of 34.83%) in Ranbaxy, putting the total enterprise value of Ranbaxy at US$8.5 billion. Daiichi-Ranbaxy deal was the largest acquisition in the Indian pharmaceutical industry and was viewed by analysts as a step towards the consolidation in the world generic drug market. The deal made Daiichi-Ranbaxy, the combined entity the 15th largest pharmaceutical company in the world with a market capitalization of around US$30 billion. It helped Daiichi leverage its innovative drug making capabilities and R&D expertise with Ranbaxy’s low cost manufacturing abilities to achieve a competitive position in the world generic drug market. Some industry experts’ claimed that the price Daiichi paid for acquisition was quite high compared to the present pricing of other Indian generic drug making companies.

Pedagogical Objectives:

• An in-depth knowledge about DCF valuation techniques
• The rationale behind the acquisition of Ranbaxy by Daiichi
• Long-term synergies arising for Ranbaxy after Daiichi acquired it
• The advantages and disadvantages of M&A deals
• The need for growth through acquisitions in foreign countries
• The consolidation trends in the Indian and Global Pharma Industries.

Keywords : Mergers and Acquisitions, DCf Valuation, Pharmaceuticals Industries, Generic Drugs, Synergies, Strategy, Industry value Chain, Daiichi Sankyo, Ranbaxy, Competitive Anaysis, Open Offer, Financial Forecasting

Contents : 
Sankyo Company Limited
Daiichi Pharmaceutical Company
Financing the Deal and Integration
The Spectrum of Activities of Ranbaxy
The Road Ahead
Ranbaxy – Consolidated Income Statement
Ranbaxy – Consolidated Balance Sheet
Overview of World Generic Market
Indian Pharmaceutical Industry
Market Size and Growth over Last 3 Years
Top 25 Pharmaceutical Companies in the World