Daiichi forayed into the Indian pharmaceutical market by buying Ranbaxy Laboratories for $4.6 billion in 2008. However, soon after, Ranbaxy faced a series of charges from the US drug regulator over falsification of data and violation in its manufacturing practices.
Daiichi Sankyo, Japan's second-largest drug manufacturer, has finally made an exit from India after it acquired Ranbaxy Laboratories from the Singh brothers in 2008, bringing an end to its turbulent journey of seven years.
On Tuesday, the company offloaded its entire 8.93% stake, or over 21 crore shares, in Sun Pharma, which it received post merger of Ranbaxy with Sun Pharma last month, for around $3.2 billion or close to Rs 20,000 crore.
Daiichi forayed into the Indian pharmaceutical market by buying Ranbaxy Laboratories for $4.6 billion in 2008. However, soon after, Ranbaxy faced a series of charges from the US drug regulator over falsification of data and violation in its manufacturing practices.
Products made at four of Ranbaxy's India facilities were banned in the US markets. Ranbaxy was pleaded guilty to felony charges by the US government and Daiichi was forced to pay a fine of $500 million for the settlement.
Last year in April, Sun Pharma announced its intent to buy out Ranbaxy from Daiichi in an all-stock deal at an enterprise value of $4 billion, including $800 million of debt that was on the Ranbaxy books. As part of the deal, Ranbaxy shareholders received 0.8 Sun Pharma shares for every Ranbaxy share they held. Daiichi held around 63.92% in Ranbaxy at the time of the merger. However, post Sun Pharma's acquisition of Ranbaxy in a share-swap deal its stake was altered to 8.93% in the combined entity. The company was also assigned rights to nominate one nominee director on Sun's board.
Since Ranbaxy's bitter tryst with the US FDA, share price of the company fell steeply. On April 2, 2014, Ranbaxy shares traded at Rs 371-level from Rs 737 in 2008, the purchase price Daiichi paid to Ranbaxy shareholders.
On Tuesday, Daiichi issued a statement which said "the sale of Sun Pharma shares has been completed". As part of the share sale, the Japanese firm sold a total of 21,49,69,058 shares of Sun Pharma. While Daiichi's share price was up 4.4% on Tokyo Stock Exchange, Sun's share fell 8.86% to Rs 951.60 on BSE.
About the impact of the deal on the company's financials, the Japanese firm said in its statement, "Daiichi Sankyo will make an announcement concerning the effect of any gain or loss on the sale of Sun Pharma shares when results of operations for the fiscal year ending in March 2015 are announced."
In a research report, ICICI Direct said, "Daiichi Sankyo has offloaded its entire 8.93% stake (21.4 crore shares) in Sun Pharma in the open market. The company has assigned indicative price band of Rs 930 and Rs 1,043.80 per share. On upper band, the total consideration stands at approx. Rs 22,420 crore. The company has sighted "perspective of improvement in corporate value'' as the reason for offloading".
According to a pharma analyst, appreciation of the Sun Pharma shares since the announcement of the merger could be a major reason for Daiichi to find this time as suitable for exit. However, the Japanese drugmaker could not make any gain from the deal as the 9% share sale in Sun Pharma yielded at least $1 billion less than what Daiichi paid for Ranbaxy in 2008, the analyst added.
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