Ranbaxy now a subsidiary of Japan co

India’s biggest drug maker Ranbaxy Laboratories has agreed to a deal worth up to US $4.6 billion to give majority control of the company to Daiichi Sankyo Company of Japan.

The mega deal is estimated to value Ranbaxy at US $8.9 billion and catapult the combined entity as the world’s 15th biggest drugs maker from the current 22nd position.

The promoters of the group, led by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, hold a 34.8-per cent stake and will get US $2.4 billion for their stake, reports IANS.

Following the deal, expected to conclude by March 2009, Ranbaxy will become a subsidiary of Daiichi Sankyo but continue to list on Indian bourses.

“This is indeed a historic date not just for the two companies but also for the future direction of the global pharmaceuticals industry,” the Company’s managing director Malvinder Singh said.

In addition to his present responsibilities as chief executive and managing director of Ranbaxy Laboratories, he will also be the company’s Chairman.

As the news on the deal started emerging Wednesday morning, the equity shares of Ranbaxy first dipped a bit but soon moved up by five per cent on the Bombay Stock Exchange (BSE) to a 52-week high of Rs 592.70.

“Together with the combined resource pool, the company would be a strong contender in both the generic as well as innovator space. And it would enable Ranbaxy to be a truly research based pharmaceutical Company,” Frost and Sullivan Healthcare Practice Industry Manager Shivani Shukla Raval said.

Under the deal reached Wednesday, Daiichi Sankyo will pay Ranbaxy promoters at least Rs 737 per share for the entire 34.8 per cent stake, and also make an open offer for a further acquisition of 20 per cent at the same price.

Daiichi Sankyo President Takashi Shoda said the deal was part of the group’s strategy to become a global company and complement their presence in original drugs with the fast-growing non-proprietary pharmaceuticals.

Daiichi Sankyo and Ranbaxy believe this transaction will create significant long-term value for all stakeholders through a complementary business combination, an expanded global reach, strong growth potential and Cost competitiveness.

This deal will help the Japanese company enter the generics drug business not just in India but also globally where Ranbaxy has a presence.

Upon completion of the transaction, Ranbaxy is expected to become a subsidiary of Daiichi Sankyo. The deal will be financed through a mix of bank debt facilities and existing cash resources of Daiichi Sankyo.