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Daiichi Sankyo sells entire 8.9% stake in Sun Pharma for $3.18B; Temasek, GIC among buyers

21 April, 2015

Japanese drugmaker Daiichi Sankyo has sold its entire holding of 8.9 per cent in India’s top pharmaceuticals firm by market value Sun Pharmaceutical Industries Ltd on Tuesday, a day after its board had approved the share sale to exit India.

This closes the chapter of its fairly aggressive move to enter the country seven years ago by acquiring Ranbaxy at a significant premium to its then market value. 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), said it 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.

The shares were sold through NSE on Tuesday. Daiichi Sankyo got Rs 20,026 crore ($3.18 billion) in the process. This is just about the same amount it had invested in rupee terms.

However, this would still mark a loss compared to the dollar investment value of Daiichi which had invested through a mix of stake purchase from previous promoters, preferential allotment and open offer, giving it 63.92 per cent stake in Ranbaxy.

Singapore’s sovereign wealth fund GIC picked 0.46 per cent stake for Rs 1,173.8 crore ($187 million) while sister entity Temasek, which is also owned by Singapore government but operates independently, bought 0.74 per cent stake for Rs 1,870 crore ($298 million). Temasek has just backed another Indian drugmaker Glenmark Pharmaceuticals with $151 million in fresh equity infusion.

A portfolio investment entity under Goldman Sachs bought 1.8 per cent stake. The identity of other investors could not be immediately ascertained.

What came as a surprise was the decision to exit right after seeing through a merger of Ranbaxy with Sun Pharma. The merger was completed early this month which gave it a significant minority 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.

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 crashed 8.8 per cent on Tuesday to close at Rs 951.6 each on BSE in a weak Mumbai market.

The company’s promoter group led by billionaire Dilip Shanghvi owns around 54.7 per cent stake. It is not clear if they bought some of the shares offloaded by Daiichi Sankyo.

(Edited by Joby Puthuparampil Johnson)


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1 Comment
Anjan Chakrabarti . 3 years ago

One of the worst case history created for India starting from Ranbaxy sale in 2008. Sorry to see this. Doesn’t do any good to Indian companies overall.

Daiichi Sankyo sells entire 8.9% stake in Sun Pharma for $3.18B; Temasek, GIC among buyers

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