Acquisition of Ranbaxy by Sunpharma

1. SunPharma Ranbaxy Acquisition

2. Introduction: Pharmacy Sector
 The pharmaceutical industry develops, produces,
and markets drugs or pharmaceuticals licensed for
use as medications. Pharmaceutical companies are
allowed to deal in generic or brand medications and
medical devices.
 The Pharmaceutical industry has grown from mere
US$o.3 billion turnover in 1980 to 15 billion in 2012-
2013.
 Globally, India ranks 3rd in terms of volume of
production(10 per cent of global share) and 14th
largest by value. (1.5 per cent of global share)
 The reason for lower value share is the lowest cost of
drugs in India ranging from 5 to 50 per cent less as
compared to developed countries.

4. Sun Pharma
 Established in 1983, listed since 1994 and
headquartered in India, Sun Pharma is an
international, integrated, specialty pharmaceutical
company.
 In India, the company is a leader in niche therapy
areas of psychiatry, neurology, cardiology,
diabetology, gastroenterology, orthopedics and
ophthalmology.
 The company has strong skills in product
development, process chemistry, and manufacturing
of complex dosage forms and APIs.
 The 2014 acquisition of Ranbaxy will make the
company the largest pharma company in India, the
largest Indian pharma company in the US, and the 5th
largest speciality generic company globally.

5. Ranbaxy
 Ranbaxy Laboratories Limited is an Indian
multinational pharmaceutical company that was
incorporated in India in 1961. The company went public in
1973 and Japanese pharmaceutical company Daiichi
Sankyo acquired a controlling share in 2008.
 Ranbaxy Limited is an integrated, research based,
international pharmaceutical company producing a wide
range of quality, affordable generic medicines, trusted by
healthcare professionals and patients across geographies.
 Ranbaxy serves its customers in over 150 countries and
has an expanding international portfolio of affiliates, joint
ventures and alliances, ground operations in 43 countries
and manufacturing operations in 8 countries.
 In 2011, Ranbaxy Global Consumer Health Care received
the OTC Company of the year award.

6. SunPharma + Ranbaxy=
Profile of a New Global Leader

7. Acquisition
 Apr 06, 2014:To create world’s 5th largest
specialty generic pharma company
 No. 1 pharma company in India with leadership
position in 13 specialty segments
 No. 1 Indian pharma company in the US
 Daiichi Sankyo to become the second largest
shareholder in Sun Pharma

8. Financial Strength

10. Why Ranbaxy?
 Ranbaxy has got a lot of ANDA's (Abbreviated
New Drug Application) approved for marketing in
USA. Their problem is to find an API plant
because main source of API was from Toansa. If
Sun Pharma fills this gap, Ranbaxy can begin its
export to the USA. So, Sun Pharma has got into
this deal at the right time and deal has an upside
for all the shareholders.
 Sun Pharma’s managing director Dilip Shanghvi
has acquired a reputation for acquiring
companies in trouble at a good price, and then
turning around their operations

11. Why Daichi sold Ranbaxy ?
 Daiichi faced criticism after Ranbaxy’s plants
came under the US Food and Drug
Administration’s (FDA’s)
 Ranbaxy’s inability to overcome its FDA-related
problems has put pressure on its promoters.
 With Sun Pharma acquiring Ranbaxy, Daiichi is
relieved of the burden of managing Ranbaxy’s
problems. It will hold a 9% stake in Sun Pharma,
as a result of its current stake in Ranbaxy.

12. Valuation
 Sun Pharmaceutical Industries fully acquired
troubled Ranbaxy Laboratories, in an all-stock
transaction with a total equity value of USD 3.2
billion.
 Under these agreements, Ranbaxy shareholders
received 0.8 share of Sun Pharma for each share
of Ranbaxy.
 The deal lead to 16.4% dilution in the equity
capital of Sun Pharma. This is because its total
equity value is $3.2 billion and the deal size is $4
billion
 The combined entity’s revenues were USD 4.2
billion with EBITDA of USD 1.2 billion for the
twelve month period ended December 31, 2013.

13. Transaction Highlights
Sun Pharma to acquire Ranbaxy
 Ranbaxy shareholders to get 0.8 shares of Sun
Pharma stock for every share of Ranbaxy
 Deal size approximately US$ 4 billion.
 Daiichi Sankyo to become the second largest
shareholder in SunPharma. Strategic business
relationship to continue with SunPharma Voting
Agreements
 Daiichi Sankyo to vote in favor of transaction
(~63.5% ownership) SunPharma promoters to
vote in favor of transaction (~63.7% ownership)

14. Indemnity:
 In connection with the transaction, Daiichi
Sankyo has agreed to indemnify SunPharma and
Ranbaxy for, among other things, certain costs
and expenses that may arise from the recent
subpoena which Ranbaxy has received from the
United States Attorney for the Toansa facility.
Conditions to close:
 Requisite approval of Sun Pharma and Ranbaxy
shareholders
 Approval of the Indian Central Government and
various other regulatory bodies

15. Effect on Stock price of Before and
after acquisition: Ranbaxy

16. Effect on Stock price of Before and
after acquisition: SunPharma

17. Advisors
 Citi and Evercore were acting as financial
advisors for the transaction to Sun Pharma. Sun
Pharma’s legal advisors are Shearman & Sterling
LLP, Crawford Bayley & Co and S. H. Bathiya &
Associates.
 Ranbaxy’s financial advisor for the transaction is
ICICI Securities and its legal advisors are Luthra
& Luthra Law Offices and Amarchand &
Mangaldas & Suresh A Shroff & Co.
 Daiichi Sankyo’s financial advisor for the
transaction is Goldman Sachs and its legal
advisors are Davis Polk & Wardwell LLP and
Amarchand & Mangaldas & Suresh A Shroff &
Co.

18. Problems to be faced by SunPharma
 The deal, has also seen Sun assume $800 million
of debt on Ranbaxy’s books, needs shareholder
and regulatory clearances.
 Ranbaxy’s all four plants have been banned by
the USDFA for violations of manufacturing norms.
In 2013, the company agreed to pay USD 500
million fine after pleading guilty to felony charges
over manufacturing and distribution of adulterated
drugs in the US.

19. Conclusion
 That was the right time for Sun Pharma to buy
Ranbaxy. Ranbaxy's problem with US Food and Drug
Administration (FDA) cannot get more intense than
they are already, things can only improve from now
onwards. There will be tremendous synergy between
the two companies when they are merged as single
entity. It will be the largest Indian generic company
and the fifth largest in the world.
 The merger will see Sun Pharma’s revenue jump by a
healthy 40% but its operating profit will rise by a
meagre 7.5%, based on pro forma 2013 financials. Its
operating profit margin will decline from 44.1% to
29.2%. Thus, the merger will have a negative effect
on its performance in the near term.

20. Bibliography
 http://www.rediff.com/business/report/benefit-of-ranbaxy-
deal-to-accrue-in-few-years-sun-pharma/
20140929.htm
 http://businesstoday.intoday.in/story/ranbaxy-acquisition-
good-for-sun-pharma-shareholders-experts/
1/205526.html
 www.sunpharma.com
 www.ranbaxy.com
 www.moneycontrol.com

21.  Thank you