Sun Pharmaceuticals' Acquisition of Ranbaxy

            

Details


Case Code : CLBS137
Period : 2008-2014
Publication date : 2014
Teaching Note :No
Subject :Business Strategy
Case Length : 04 Pages
Countries : India
Industry : Pharmaceutical

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Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

Sun Pharmaceutical Industries, a multinational pharmaceutical company and one of the major players in the generic drug market in India, already had 16 successful acquisitions in its kitty when it acquired Ranbaxy in April 2014. The acquisition was expected to make the combined entity the 5th largest generic drug making company in the world and the largest in India. Ranbaxy had run into trouble with the FDA over regulatory issues in the past. The case deals with the future growth prospects, possible difficulties, and challenges that Sun Pharma could face post merger.

Issues:

The strategies companies in the pharmaceutical sector follow.
The complexities involved in the merger and acquisition of two big players in the same industry.

Introduction

On April 06, 2014, India-based pharmaceutical companies, Sun Pharmaceutical Industries (Sun Pharma) and Ranbaxy Laboratories Limited (Ranbaxy), entered into an agreement under which Sun Pharma would acquire 100% of Ranbaxy in an all stock-transaction. The transaction had a total equity value of approximately US$ 3.2 billion , . The shareholders of Ranbaxy would receive a 0.8 share of Sun Pharma for each share of Ranbaxy. The exchange ratio represented an implied value of Rs.457 for each Ranbaxy share.

The combination of Sun Pharma and Ranbaxy was expected to create the fifth largest generic drug making company in the world and the largest in India. After the merger, Ranbaxy would cease to exist and the operations of the combined entity would be spread across 65 countries with 47 manufacturing facilities. It was expected to have a significant platform of specialty and generic products marketed globally including 629 ANDAs . Daiichi Sankyo Inc (Daiichi) , the previous owner of Ranbaxy, became the second largest shareholder in Sun Pharma and was to have one representative on the company's board of directors....

Questions:
1. What made Sun Pharma go in for the acquisition of Ranbaxy?
2. Did Dilip Shanghvi, Managing Director of Sun Pharma, make the right decision by acquiring the troubled Ranbaxy? Discuss.
3. List the challenges that Sun Pharmaceuticals could face post merger.

Key words:
Sun Pharma Ranbaxy merger, Sun Pharma, Ranbaxy, Daiichi, ANDA, FDA, generic drug, regulatory issues, SEBI, CCI, acquisition, pharmaceutical industrys







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