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Daiichi Sankyo puts $3.6B stake in Sun Pharma on the block

20 April, 2015

Japanese drugmaker Daiichi Sankyo is looking to sell partly or fully its 9 per cent stake in India’s top pharmaceuticals firm by market value Sun Pharmaceutical Industries Ltd. The company said its board has approved the share sale on Monday.

Daiichi Sankyo, which bought majority stake in Ranbaxy Laboratories Ltd in 2008 in what was then a $4.1 billion deal (around Rs 20,000 crore then), will get to encash as much as Rs 22,450 crore ($3.6 billion) based on the last traded market price of Sun Pharma.

This would still be at a loss compared to the dollar investment value of Daiichi through a mix of stake purchase from previous promoters, preferential allotment and open offer, which gave it 63.92 per cent stake in Ranbaxy.

“From the perspective of the improvement of corporate value, Daiichi Sankyo has performed a review of the Sun Pharma shares and reached a conclusion to sell the shares entirely or partially. After the sale, Daiichi Sankyo will not be a major shareholder of Sun Pharma. However, the existing business partnership with Sun Pharma will remain unchanged,” the Japanese firm said.

This would mark a quick exit right after seeing through a merger of Ranbaxy with Sun Pharma. The merger was completed early this month which gave it 9 per cent stake in Sun Pharma in lieu of its majority holding in Ranbaxy.

When the all-stock acquisition was announced a year ago the deal was valued at $4 billion, including debt to be transferred to the books of Sun Pharma. However, the rise in value of share price of Sun Pharma pushed up the investment value of Daiichi Sankyo’s holding significantly.

Sharp depreciation of Indian rupee since it invested means that it would still exit with a small loss.

As and when Daiichi Sankyo executes the share sale, which is expected to come as early as Tuesday, it will bring to an end its tumultuous foray into India.

Ever since Daiichi acquired Ranbaxy, it had been besotted with a series of regulatory problems in its key market the US. This resulted in a clutch of penalties and ban on export of products from Indian factories to the US market over several deficiencies.

Sun Pharma shares gained 0.58 per cent on Monday to close at Rs 1,043.80 per share on NSE in a weak Mumbai market.

The company’s promoter group led by billionaire Dilip Shanghvi owns around 54.7 per cent stake. It is to be seen if they buy some or all of the shares to be offloaded by Daiichi Sankyo.

(Edited by Joby Puthuparampil Johnson)


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Daiichi Sankyo puts $3.6B stake in Sun Pharma on the block

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