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June 19, 2008 8:15 AM

In Robust Asian Market, Ranbaxy-Daiichi Deal Surprises Some

Posted by Jonathan Thrope

The settlement by Ranbaxy Laboratories over its Lipitor patent-infringement case with Pfizer wasn't the only news about India's generic drug company this past week.

As widely reported, Ranbaxy, one of the biggest manufacturers of generic pharmaceuticals in the world, is in negotiations with Tokyo's Daiichi Sankyo over Daiich's plans to take control of Ranbaxy for upwards of $4.6 billion. Daiichi, Japan's second-largest pharmaceutical company, will assume the 34.8 percent stake in Ranbaxy held by the company's founding Singh family; it has extended an open offer for an additional 20 percent.

"This transaction beats anything India has ever seen in terms of complexity of the deal, the global span of the deal, and the size of the deal," says Anand Pathak, a partner at P&A Law Offices in New Delhi, Indian counsel for Daiichi Sankyo. "This is the largest listed company transaction in the history of India."

In addition to P&A Law Offices, Daiichi turned to a team from Jones Day as lead counsel on the transaction. Tokyo-based M&A partner Scott Jones--who advises Japanese clients on foreign investments--coordinated the multinational effort with Jones Day lawyers across the globe. The deal crosses several jurisdictions, including the United States, the European Union, Ukraine, China, India, and Japan. Jones has served as an adviser to Daiichi since 1996.

Bomi Daruwalla of Vaish Law Associates's Mumbai office headed Ranbaxy's legal team along with Martand Singh and Amitjivan Joshi.

"I certainly think that this has come at a time which is unique [for India]," says Pathak. In the past, foreign companies would come to invest in India. But over the last three years, the lawyer says, Indian companies began buying foreign companies--Tata Motors's recent purchase of Ford Motor Company's Jaguar and Land Rover divisions is a recent example. Now, by surprise, India's first multinational company is being taken over by a foreign firm.

Some reports have questioned whether the sale is a setback to the rise of Indian multinationals, suggesting that the Singh family, in handing over its entire stake, has sold out. The announced sale came only days after Ranbaxy's CEO and managing director, Malvinder Mohan Singh, told New Delhi's Business Standard that the company was looking to make its own acquisitions.

Though such a "reverse" move, as Pathak describes it, is both a rarity and a surprise, the Daiichi-Ranbaxy transaction points to a broader surge in Asian M&A.

As doom and gloom has ensnared the American economy, Asian companies have increasingly made deals amongst themselves. According to a story in the June 16 edition of London's Financial Times, intra-Asian M&A is at an all-time high. Based on recent Dealogic data, the FT reported that the total value of cross-border deals this year between Asia Pacific countries has already reached $54 billion, more than double last year's total for the same period. By the end of the year, bankers expect the number to surpass last year's $76.2 billion total value.

"Asian companies are taking advantage of strong balance sheets and ready access to capital to create regional champions capable of becoming major global players in sectors ranging from telecoms to resources," Mark Renton, Citigroup's head of investment banking for Asia Pacific, said in the article.

Pathak notes that in addition to telecoms, Asian chemical and infrastructure companies are beginning to buy or invest throughout the continent. Chinese and Middle Eastern Companies are looking to India, for example, developing roads and real estate in addition to phone lines. The investments, Pathak says, "range anywhere from $100 million to $1 billion."

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