NEW DELHI (AFP) — Japanese pharmaceutical firm Daiichi Sankyo said Wednesday it would buy control of top Indian generics firm Ranbaxy for up to 4.6 billion dollars, entering the fast-expanding copycat drugs market.
Daiichi Sankyo, Japan's third-largest drugmaker, said it would purchase the 35 percent stake held by the Singh family, who control Ranbaxy Laboratories, for 737 rupees a share -- a 31 percent premium to the company's closing price Tuesday -- and make an open share offer to bring its holding to 51.1 percent.
With the purchase, the latest in a series of global health tie-ups to be announced by drugmakers, Daiichi Sankyo said it aimed to become the number one generics maker in Japan, where non-branded drugs account for a scant five percent of the market.
That percentage is expected to rise as Japan's population ages and pressure mounts on healthcare managers to clamp down on soaring medical costs, a phenomenon also occurring in other developed nations.
Both firms would explore how to "optimise" growth opportunities, but Daiichi Sankyo stressed it would respect Ranbaxy's autonomy as a "standalone" company.
"It marks a very important step to the next level of growth, a new orbit," said Malvinder Singh, grandson of Ranbaxy's founder and who will remain Ranbaxy's chief executive.
"This is not a sellout... this is a chance to do something transformational," he said about the takeover, which comes as many Indian firms have been making headlines for large-scale overseas acquisitions.
"This will allow us to grow further, faster and be better."
Billionaire brothers Malvinder and Shivinder Singh inherited their controlling stake in Ranbaxy after their father's death in 1999.
The deal, the largest ever in the Indian pharmaceutical industry, would help turn Ranbaxy into a "research-based international pharmaceutical company," said Singh, adding it could not rely on generics alone to propel its growth in the intensely competitive non-branded drugs market.
Daiichi Sankyo -- best known for its high blood pressure medication Benicar -- is seen by analysts as having a solid number of new drugs in its development pipeline.
The deal would "enable Ranbaxy to explore their shared capabilities in drug development as well manufacturing and... enable Ranbaxy to be a truly research based pharmaceutical company," said Shivani Shukla Raval, healthcare analyst at global consultancy Frost & Sullivan.
"For the buyer, it makes sound business sense (as)... Ranbaxy is amongst the top 10 generic manufacturers in the world," the analyst said.
Ranbaxy, which derives 80 percent of its sales from abroad, has grown by selling cheap copies of branded drugs that have gone off-patent and through successful challenges to patents owned by Western companies.
The deal would make Daiichi Sankyo the 15th largest pharmaceutical company in the world, up from 22nd now, Shoda said, adding that the company would have a presence in 60 countries, up from 21.
Daiichi Sankyo said the deal, slated to close by March 2009 subject to regulatory approvals, would be financed through a 50-50 mix of debt and cash.
Malvinder said the takeover was part of a global shakeout in the drugs industry with players under pressure to consolidate and diversify.
Industry watchers in Japan, where pharmaceutical companies have been investing in acquisitions to drive growth, said the deal also could shake up the sector at home.
"I expect a drastic realignment in the drug industry in Japan. It will become more severe for mid-sized drugmakers to survive," said Takashi Akahane, analyst at Tokai Tokyo Securities.
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