Tuesday, June 10, 2008

Burning question : what will happen to Ranbaxy subs?

Japanese major Daiichi Sankyo is set to buy the promoters - Malvinder Singh and Shivinder Singh's 34.8% stake in India's largest drugmaker Ranbaxy Laboratories.

The Share Purchase and Share Subscription agreement 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 Rs.737 per share.

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.

Burning question – will there be open offers in its subs Zenotec, Jupiter Biosciences, Krebs Biochemicals and Orchid Chemicals?

If the deal comes through, it would mean a complete exit of Ranbaxy promoters from the company. SEBI regulations mandate any acquisition in excess of 15% in a company will trigger open offer and the acquirers will have to buyout at least 20% from the other shareholders at the same price they paid the promoter or the price computed by SEBI formula, whichever is higher.
I like the shift in trend. Long held family stakes are no longer looked upon as non-disposable heirloom by younger generation. If an acquirer comes along offering 3x sales or at an attractive premium, the owners are willing to exit. That means there's a lot going for dealmakers like me. Long live change agents like Malvinder Singh! Hope the deal goes thro smoothly and closes fast. We don’t want a repeat of Bharti-MTN-RCom conundrum…...!!!
[Update : Open offer will be triggered in Zenotech]

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