Presented To: Mrs. Drashti Shah 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 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

- k. k.

PERIODTARGET COMPANY ACQUIRERDEAL VALUE FEB ’07Hutch-Essar Vodafone13.1 JUN’08Ranbaxy LabDaiichi Sankyo4.6 APR’06FlextronicsKRR & Vo LP0.9 JAN’06Ambuja CemHolcim0.6 AUG’06Matrix LabMylan Inc0.5 Deal Value in billion Dollar

-k.k. PERIODTARGET COMPANY ACQUIRERDEAL VALUE FEB ’07Hutch-Essar Vodafone13.1 JUN’08Ranbaxy LabDaiichi Sankyo4.6 APR’06FlextronicsKRR & Vo LP0.9 JAN’06Ambuja CemHolcim0.6 AUG’06Matrix LabMylan Inc0.5

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

1961 Company Incorporate 1977 Ranbaxy’s First Joint Venture In Lagos (Nigeria) Is Setup 1985 Ranbaxy Research Foundation Is Established 1992 Company Enters Into An Agreement To Setup A Joint Venture In China Ranbaxy Ltd Acquisition Of Ohm Laboratories In Us 1998 Ranbaxy Enters USA Worlds Largest Pharma Market, With Products Under Own Name 2003 Receives The Economic Times Award For Corporate Excellence For ‘The Company Of The Year ’ 2006 Ranbaxy Acquired Unbranded Generic Business Of GSK In Italy And Spain

 Cost effective technology  Drug delivery system management  Production of generic drugs  Pharmaceutical ingredients ( apis) future growth drivers STRENGTHs of ranbaxy

Formation of Daiichi Sankyo Daiichi Sankyo Company, Limited, Japan Daiichi Pharmaceutical Co., Ltd. Sankyo Company, Limited 2005

HISTORY OF DAIICHI-SANKYO DAIICHISANKYO  1915 Arsemin Shokai, DAIICHI’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  1899 SANKYO Shoten, SANKYO’s 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. 28 th 2005.(JAPAN) ‏  CEO :TAKASHI SHODA  Workforce : 16,237 People.  Major Industry : Ethical Drug Manufactures.  Annual Sales in FY’07: US$ 8.7 Bn  Established in Sept. 28 th 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 INNOVATIVE PHARMACEUTICALS.”

STRENGTHS OF DAIICHI-SANKYO  Japan’s second largest drug maker company  Ranked 22 nd 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 Geographical diversification Entry into non-proprietary drugs for Daiichi-Sankyo Product Extension Realization of sustainable growth through a complementary business model Acceleration of innovative drug creation by optimizing value chain efficiency. SYNERGY

Shareholding Pattern of Ranbaxy Laboratories Ltd.

 Daiichi-Sankyo acquired 34.8% stake in Ranbaxy on 11 th 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$ 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 230,970 Share purchases by issuance of new shares 85,001 Direct acquisition related expenditures 2,974 Total488,354 Gain of promoters Money infused in Ranbaxy’s balance sheet

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) Goodwill408.7 Total consideration %

Valuation of Ranbaxy Laboratories Ltd. Price paid per share by Daiichi Rs week high / low as on 11 th June 2008 for Ranbaxy share Rs. 593 / 300 Valuation of 63.92% stake by Daiichi crores Valuation of 100% equity of Ranbaxy as per the deal crores Enterprise valuation of Ranbaxy (on a fully diluted basis) $ 8.5 billion Market capitalization of Ranbaxy as on 30 th May 2009 (conclusion of deal) 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 Reason Net profit / (loss) for Daiichi-Sankyo in FY Recording of ¥351.3 billion in extraordinary losses due to a one-time write-down of goodwill pertaining to the investment in Ranbaxy. Net profit / (loss) for Daiichi-Sankyo in FY2009 (215.5) Net cash used in investing activities in FY It is due to the cash acquisitions of shares in U3 Pharma and Ranbaxy, which entailed cash outgos. Net cash used in investing activities in FY Short term bank loans in FY Borrowings for the acquisition of Ranbaxy's share ¥ billion Borrowings for the acquisition of Ranbaxy's share ¥ billion Increase by consolidation of Ranbaxy Short term bank loans in FY

Impact of Ranbaxy deal on Daiichi’s Balance Sheet In Yens (billion) Reason Loss on valuation of derivatives in FY Consolidation of Ranbaxy: ¥ billion Loss on valuation of derivatives in FY Foreign exchange losses in FY Consolidation of Ranbaxy: ¥ billion Foreign exchange losses in FY Purchases of investments in consolidated subsidiaries in FY Acquisition of Ranbaxy: ¥387.0 billion Purchases of investments in consolidated subsidiaries in FY

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 Daiichi- Sankyo  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 15 th 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 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