Earlier in March, Sun Pharma completed the acquisition of Ranbaxy after going through all the regulatory processes for over a year. Sun Pharma purchased Ranbaxy from Daiichi in a $3.2B transaction, thereby emerging India’s largest drug maker and the world’s fifth largest maker of off-patent or generic drugs.
With this sale, Daiichi sees a close of a harrowing chapter which began when it purchased Ranbaxy in 2008 from Malvinder and Shivinder Singh for $4.6 billion. When the USFDA pulled up Ranbaxy for technical deficiencies and accused the firm of faking test results to obtain clearances for its products, Daiichi was forced to pay $500 million in settlement. It had been a rough terrain for the Japanese drug maker as the value of Daiichi’s stake fell about half.
The current bulk purchase deal by Sun Pharma beat many records on Dalal Street. On a closer look, the statistics shows that the size of the transaction was more than twice that of the previous biggest bulk deal. The Rs 20,000-Crores deal is more than twice a 2012 deal in which Citigroup sold Rs 9,393 Crores worth of HDFC shares in a bulk deal.
As for Sun Pharma, the exit will have had little impact on its performance. The merger between Sun Pharma and Ranbaxy has been completed; it is now a question of how the synergies between the two companies will flow. The focus ahead for Sun Pharma will be to address Ranbaxy’s issue with the US FDA, as four out of five US-centric facilities are still under the USFDA embargo. Also, the company will need to be careful on splitting management bandwidth by investing in non-core businesses, as it will not be appreciated by the market in the long run.
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