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India’s largest pharmaceutical company, Ranbaxy Laboratories Limited (Ranbaxy), and Daiichi Sankyo Company, Ltd (Daiichi Sankyo), one of the largest pharmaceutical companies in Japan, has announced a binding share purchase and share subscription agreement (the SPSSA) has been entered into between Daiichi Sankyo, Ranbaxy and the Singh family, the largest and controlling shareholders of Ranbaxy.

The agreement will see Daiichi Sankyo acquire the entire shareholding of the Singh family in Ranbaxy and further seek to acquire the majority of the company’s voting capital. The total transaction value is expected to be between $3.4 to $4.6bn. The transaction would value Ranbaxy at $8.5bn.

Malvinder Singh will continue to lead the company as its CEO and Managing Director while additionally assuming the position of Chairman of the Board, upon closure.

Singh said he was delighted with the association with Daiichi Sankyo. “[The agreement] will put us on a new and much stronger platform to harness our capabilities in drug development, manufacturing and global reach”. He continued, “Together with our pool of scientific, technical and managerial resources and talent, we would enter a new orbit to chart a higher trajectory of sustainable growth in the medium and long term in the developed and emerging markets organically and inorganically. This is a significant milestone in our Mission of becoming a Research based International Pharmaceutical Company”.

Takashi Shoda, President and CEO of Daiichi Sankyo said that the agreement was part of his company’s goal of becoming a Global Pharma innovator and provided a strong presence in non-proprietary pharmaceuticals. "This complementary combination represents a perfect strategic fit and delivers a considerable opportunity for the future growth,” he said. Shoda continued, “While both companies will closely cooperate to explore how to fully optimize our growth opportunities, we will respect Ranbaxy’s autonomy as a standalone company as well”.

The SPSSA was unanimously approved by the boards of directors of both companies. Daiichi Sankyo is to acquire the majority equity stake in Ranbaxy through a combination of purchase of shares held by the Singh family, the preferential allotment of equity shares, an open offer to the public shareholders for 20% of Ranbaxy’s shares, as per Indian regulations, and through exercising of a portion or all of the share warrants to be issued on a preferential basis.

The purchase price represents a premium of 53.5% to Ranbaxy’s average daily closing price on the National Stock Exchange for the three months ending on 10 June 2008 and 31.4% to such closing price on June 10 2008.

The closing of the transactions is subject to approval of shareholders of Ranbaxy and customary regulatory and statutory approvals. The acquisition is expected to be completed by the end of March 2009. 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.

This material first published by the LexisNexis Butterworths. All rights reserved.