2010 Taro Pharmaceutical Industries Limited Acquired majority stake in a multinational generic manufacturer with established North America presence and a strong dermatology franchise 2009 Products from Forest Lab's Inwood Division 2008 Chattem Chemicals Incorporated Acquired a manufacturer of controlled substances with an API facility 2005 Assets of Able Laboratories Acquired controlled substance manufacturing assets. 2005 Hungarian Operations and Formulation Plant of ICN Acquired Alkaloida’s controlled substance APIs and dosage form manufacturing plant. 2004 Products from Women's first Healthcare 2004 Phlox Pharma Acquired manufacturer of cephalosporin API holding USA and European approvals 2002 MJ Pharma Initial stake investment in 1996, 100% takeover in 2002. Acquired plant with USFDA and UKMHRA approvals for oral dosage forms 2000 Pradeep Drug Company Chennai based API manufacturer is merged with Sun Pharma. 1999 Milmet Laboratories Helped initiate entry in ophthalmology 1999 Gujarat Lyka Organics Initial stake investment in 1996, 100% takeover in 1999. Acquired Cephalexin and 7ADCA actives manufacturing site 1998 Products from NatcoPharma Helped initiate entry in chest and respiratory therapy areas 1997 TamilnaduDadha Pharmaceuticals Limited Helped initiate entry in oncology and gynaecology
Extensive Product Basket – largely Branded business with minimal overlap Strong Doctor Relationships and opportunities to leverage market presence to cross-sell products US$ 250 million of revenue &operational synergies by 3rd year primarily derived from top-line growth, and procurement & supply chain efficiencies The US Food and Drug Administration's approval to Nexium and Diovan could provide benefits of $300-400 million net income in the short term b) Synergies that can be realised and value of the synergies According to the analysts at Sun pharma, it expects to realise its merger related synergies by the third year of acquisition. The synergies that it expects to obtain are the revenue and operational synergies resulting from sales growth, procurement and supply chain efficiencies. The expected value of the synergies is $250 million or 1550 crore from merger related synergies by third year after the acquisition is completed. c) DCF method for Valutaion Fiscal Period March (in INR crores) 2014 2015 2016 2017 Sales ₹ 13,040.30 ₹ 12,944.80 ₹ 12,912.90 ₹ 13,577.00 Operating income (EBITDA) ₹ 973.20 ₹ 2,259.80 ₹ 1,775.40 ₹ 1,975.20 Operating profit (EBIT) ₹4,97.00 ₹ 1,689.00 ₹ 13,63.00 ₹ 1,503.00 taxes ₹ 343.50 ₹ 311.00 ₹ 323.00 ₹ 488.00 NOPAT [EBIT(1-t)] ₹ 153.5.00 ₹ 1378.80 ₹ 1,040.00 ₹ 1,015.00 D&A ₹ 476.20 ₹ 570.00 ₹ 412.40 ₹ 471.80 capex ₹ 780.90 ₹ 495.10 ₹ 530.10 ₹ 522.40 change in NWC ₹ 326.00 ₹ 324.00 ₹ 323.00 ₹ 339.00 Free Cash Flow -₹ 477.70 ₹ 1,129.70 ₹ 599.30 ₹ 625.80 Terminal Value ₹ 24,416.98 WACC 8.72% 8.72% -₹ 477.70 ₹ 1,129.70 ₹ 599.30 ₹ 25,042.78
EBIDTA of Ranbaxy is very low around 10%, way below industry standards and Sun Pharma has to increase the EBIDTA Sun Pharma has to increase the profitability in emerging markets like Romania where Ranbaxy is doing bad There may be an issue with the Competition Commission of India as there are nearly 25 drugs in which the combined entity holds more than 40% market share Ranbaxy has high debt on its balance sheet and Sun Pharma needs to come out with ways to reduce the debt going forward. The deal is USD 4 billion an may limit the Sun Pharma from entering the speciality business for some time However, Sun Pharma will have tough task to shelve high overheads in Ranbaxy and improve profitability in business - something it has done in case of Taro It will be really challenging to integrate the 9000 plus marketing personnel of both the companies given that he culture are different g) The regulatory issues that can come up are There are around 46 drugs in which the combined entity becomes a dominant player. Competition Commission of India is currently watching whether the company increases the prices or cuts production in these categories The companies have shortlisted 37 molecules out of 246 molecules in which their combined market share is more than 15 per cent while in some cases it stands above 90 per cent. The individual market share of the companies in these 37 molecules is greater than 5 percent. CCI has said that public consultation has been launched in order to determine whether the combined entity has any adverse impact on competition in relevant market in India. The roadmap for integration should be Regulatory approvals from various bodies such as SEBI, CCI, Stock Exchanges, High Courts of Gujarat, Haryana and Punjab, and the stakeholders of both companies