The companies have announced a binding share purchase and share subscription agreement (the "SPSSA") between Daiichi Sankyo, Ranbaxy and the Singh family, the largest and controlling shareholders of Ranbaxy (the "Sellers") today.
Daiichi Sankyo will acquire the entire shareholding of the sellers in Ranbaxy and further seek to acquire the majority of the voting capital of Ranbaxy at a price of Rs 737 per share with the total transaction value expected to be between $3.4 billion to $4.6 billion (currency exchange rate: US $1=Rs43). On the post closing basis, the transaction would value Ranbaxy at $8.5 billion.
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.
The SPSSA has been unanimously approved by the Boards of Directors of both companies. Daiichi Sankyo is expected to acquire the majority equity stake in Ranbaxy by a combination of (i) purchase of shares held by the Sellers, (ii) preferential allotment of equity shares, (iii) an open offer to the public shareholders for 20% of Ranbaxy's shares, as per Indian regulations, and (iv) Daiichi Sankyo's exercise of a portion or all of the share warrants to be issued on a preferential basis. All the shares/warrants will be acquired/issued at a price of Rs737 per share.
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This 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 June 10, 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.
It is anticipated that the transaction will be accretive to Daiichi Sankyo's EPS and Operating income before amortization of goodwill in the fiscal year ending March 31, 2010 (FY2009).
EPS and Operating income after amortization of goodwill are expected to see an accretive effect in FY2010 and FY2009, respectively.
Nomura Securities Co., Ltd., the Japan headquartered investment bank, acted as the exclusive financial advisor, Jones Day as the legal advisor outside India, P&A Law office as the legal advisor in India, Mehta Partners LLC as the strategic business advisor and Ernst & Young as the accounting and tax advisor to Daiichi Sankyo.
Religare Capital Markets Limited, a wholly owned subsidiary of Religare Enterprises Limited, is the exclusive financial advisor to Ranbaxy and the Singh family.
Vaish Associates are the legal advisors to Ranbaxy and the Singh family.