The financial year 2007-08 witnessed a slew of acquisitions across diverse sectors of the economy in India.

Unlike in the past, such activity was not limited to acquisitions within India or of Indian companies. Of all sectors, steel was the most dominant in terms of stake sales as deals valuing $ 3.862 billion took place in Q1 of 2007-08 by the Indian companies in the global arena. Energy ranked second, with automotive and auto components close on its heels.1 In the domestic segment, iron ore, aviation and steel were the most prolific in terms of mergers and acquisitions. With Indian corporate houses showing sustained growth over the last decade, many have shown an interest in growing globally by choosing to acquire or merge with other companies outside India. One such example would be the acquisition of Britains Corus by Tata an Indian conglomerate by way of a leveraged buy-out. The Tatas also acquired Jaguar and Land Rover in a significant cross border transaction. Whereas both transactions involved the acquisition of assets in a foreign jurisdiction, both transactions were also governed by Indian domestic law. Whether a merger or an acquisition is that of an Indian entity or it is an Indian entity acquiring a foreign entity, such a transaction would be governed by Indian domestic law. In the sections which follow, we touch up on different laws with a view to educate the reader of the broader areas of law which would be of significance. Mergers and acquisitions are methods by which distinct businesses may combine. Joint ventures are another way for two businesses to work together to achieve growth as partners in progress, though a joint venture is more of a contractual arrangement between two or more businesses. A. MERGERSAND AMALGAMATIONS.
The term merger is not defined under the Companies Act, 1956 (the Companies Act), the Income Tax Act, 1961 (the ITA) or any other Indian law. Simply put, a merger is a combination of two or more distinct entities into one; the desired effect being not just the accumulation of assets and liabilities of the distinct entities, but to achieve several other benefits such as, economies of scale, acquisition of cutting edge technologies, obtaining access into sectors / markets with established players etc. Generally, in a merger, the merging entities would cease to be in existence and would merge into a single surviving entity.

Very often, the two expressions "merger" and "amalgamation" are used synonymously. But there is, in fact, a difference. Merger generally refers to a circumstance in which the assets and liabilities of a company (merging company) are vested in another company (the merged company). The merging entity loses its identity and its shareholders become shareholders of the merged company. On the other hand, an amalgamation is an arrangement, whereby the assets and liabilities of two or more companies (amalgamating companies) become vested in another company (the amalgamated company). The amalgamating companies all lose their identity and emerge as the amalgamated company; though in certain transaction structures the amalgamated company may or may not be one of the original companies. The shareholders of the amalgamating companies become shareholders of the amalgamated company. 1 Sourced from ASSOCHAM ECO PULSE Mergers and Acquisitions in First Quarter 2007-08, July 2007 4 While the Companies Act does not define a merger or amalgamation, Sections 390 to 394 of the Companies Act deal with the analogous concept of schemes of arrangement or compromise between a company, it shareholders and/or its creditors. A merger of a company A with another company B would involve two schemes of arrangements, one between A and its shareholders and the other between B and its shareholders. Sections 390 to 394 are discussed in greater detail in Part II of this paper. The ITA defines the analogous term amalgamation as the merger of one or more companies with another company, or the merger of two or more companies to form one company. The ITA goes on to specify certain other conditions that must be satisfied for the merger to be an amalgamation which conditions are discussed in Part VI of this paper. Mergers may be of several types, depending on the requirements of the merging entities:

Horizontal Mergers. Also referred to as a horizontal integration, this kind of merger takes place between entities engaged in competing businesses which are at the same stage of the industrial process.2 A horizontal merger takes a company a step closer towards monopoly by eliminating a competitor and establishing a stronger presence in the market. The other benefits of this form of merger are the advantages of economies of scale and economies of scope. Vertical Mergers. Vertical mergers refer to the combination of two entities at different stages of the industrial or production process. For example, the merger of a company engaged in the construction business with a company engaged in production of brick or steel would lead to vertical integration. Companies stand to gain on account of lower transaction costs and synchronization of demand and supply. Moreover, vertical integration helps a company move towards greater independence and self-sufficiency. The downside of a vertical merger involves large investments in technology in order to compete effectively. Congeneric Mergers. These are mergers between entities engaged in the same general industry and somewhat interrelated, but having no common customer-supplier relationship. A company uses this type of merger in order to use the resulting ability to use the same sales and distribution channels to reach the customers of both businesses.3 Conglomerate Mergers. A conglomerate merger is a merger between two entities in unrelated industries. The principal reason for a conglomerate merger is utilization of financial resources, enlargement of debt capacity, and increase in the value of outstanding shares by increased leverage and earnings per share, and by lowering the average cost of capital.4 A merger with a diverse business also helps the company to foray into varied businesses without having to incur large start-up costs normally associated with a new business.

Cash Merger. In a typical merger, the merged entity combines the assets of the two companies and grants the shareholders of each original company shares in the new company based on the relative valuations of the two original companies. However, in the case of a cash merger, also known as a cash-out merger, the shareholders of one entity receive cash in place of shares in the merged entity. This is a common practice in cases where the shareholders of one of the merging entities do not want to be a part of the merged entity. Triangular Merger. A triangular merger is often resorted to for regulatory and tax reasons. As the name suggests, it is a tripartite arrangement in which the target merges with a subsidiary of the acquirer. Based on 2 Corporate Mergers Amalgamations and Takeovers, J.C Verma, 4th edn., 2002, p.59 3 Financial Management and Policy-Text and Cases, V.K Bhalla, 5th revised edn., p.1016 4 ibid, note 4, at p. 59 5 which entity is the survivor after such merger, a triangular merger may be forward (when the target merges into the subsidiary and the subsidiary survives), or reverse (when the subsidiary merges into the target and the target survives). B. ACQUISITIONS. An acquisition or takeover is the purchase by one company of controlling interest in the share capital, or all or substantially all of the assets and/or liabilities, of another company. A takeover may be friendly or hostile, depending on the offeror companys approach, and may be effected through agreements between the offeror and the majority shareholders, purchase of shares from the open market, or by making an offer for acquisition of the offerees shares to the entire body of shareholders. Friendly takeover. Also commonly referred to as negotiated takeover, a friendly takeover involves an

acquisition of the target company through negotiations between the existing promoters and prospective investors. This kind of takeover is resorted to further some common objectives of both the parties. Hostile Takeover. A hostile takeover can happen by way of any of the following actions: if the board rejects the offer, but the bidder continues to pursue it or the bidder makes the offer without informing the board beforehand. Leveraged Buyouts. These are a form of takeovers where the acquisition is funded by borrowed money. Often the assets of the target company are used as collateral for the loan. This is a common structure when acquirers wish to make large acquisitions without having to commit too much capital, and hope to make the acquired business service the debt so raised. Bailout Takeovers. Another form of takeover is a bail out takeover in which a profit making company acquires a sick company. This kind of takeover is usually pursuant to a scheme of reconstruction/rehabilitation with the approval of lender banks/financial institutions. One of the primary motives for a profit making company to acquire a sick/loss making company would be to set off of the losses of the sick company against the profits of the acquirer, thereby reducing the tax payable by the acquirer. This would be true in the case of a merger between such companies as well. Acquisitions may be by way of acquisition of shares of the target, or acquisition of assets and liabilities of the target. In the latter case it is usual for the business of the target to be acquired by the acquirer on a going concern basis, i.e. without attributing specific values to each asset / liability, but by arriving at a valuation for the business as a whole (in the context of the ITA, such an acquisition is referred to as a slump sale and discussed in greater detail in Part VI of this paper).

An acquirer may also acquire a target by other contractual means without the acquisition of shares, such as agreements providing the acquirer with voting rights or board rights. It is also possible for an acquirer to acquire a greater degree of control in the target than what would be associated with the acquirers stake in the target, e.g., the acquirer may hold 26% of the shares of the target but may enjoy disproportionate voting rights, management rights or veto rights in the target. C. JOINT VENTURES. A joint venture is the coming together of two or more businesses for a specific purpose, which may or may not be for a limited duration. The purpose of the joint venture may be for the entry of the joint venture parties into a new business, or the entry into a new market, which requires the specific skills, expertise, or the 6 investment of each of the joint venture parties. The execution of a joint venture agreement setting out the rights and obligations of each of the parties is usually a norm for most joint ventures. The joint venture parties may also incorporate a new company which will engage in the proposed business. In such a case, the byelaws of the joint venture company would incorporate the agreement between the joint venture parties.

Ranbaxy Laboratories Limited (BSE: 500359) is an Indian pharmaceutical company. Incorporated in 1961, Ranbaxy exports its products to 125 countries with ground operations in 46 and manufacturing facilities in seven countries.[citation needed] The company went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo gained majority control in 2008.[2] CEO and Managing Director Atul Sobti resigned from Ranbaxy in late 2010.

Contents
[hide]

1 History o 1.1 Formation o 1.2 Trading

o 1.3 Acquisition 2 See also 3 Notes

4 External links

[edit] History
[edit] Formation
Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a combination of the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir and Gurbax. After Bhai Mohan Singh's son Parvinder Singh joined the company in 1967, the company saw an increase in scale. His sons Malvinder Mohan Singh and Shivinder Mohan Singh sold the company to the Japanese company Daiichi Sankyo in June 2008.

[edit] Trading
In 1998, Ranbaxy entered the United States, the world's largest pharmaceuticals market and now the biggest market for Ranbaxy, accounting for 28% of Ranbaxy's sales in 2005.[citation needed] For the twelve months ending on 31 December 2005, the company's global sales were at US $1,178 million with overseas markets accounting for 75% of global sales (USA: 28%, Europe: 17%, Brazil, Russia, and China: 29%). For the twelve months ending on December 31, 2006, the company's global sales were at US $1,300 million. Most of Ranbaxy's products are manufactured by license from foreign pharmaceutical developers, though a significant percentage of their products are off-patent drugs that are manufactured and distributed without licensing from the original manufacturer because the patents on such drugs have expired. In December 2005, Ranbaxy's shares were hit hard by a patent ruling disallowing production of its own version of Pfizer's cholesterol-cutting drug Lipitor, which has annual sales of more than $10 billion.[3] In June 2008, Ranbaxy settled the patent dispute with Pfizer allowing them to sell Atorvastatin Calcium, the generic version of Lipitor(R)and Atorvastatin Calcium-Amylodipine Besylate, the generic version of Pfizer's Caduet(R) in the US starting November 30, 2011. The settlement also resolved several other disputes in other countries.[citation needed] On 23 June 2006, Ranbaxy received from the United States Food & Drug Administration a 180day exclusivity period to sell simvastatin (Zocor) in the U.S. as a generic drug at 80 mg strength. Ranbaxy competes with the maker of brand-name Zocor, Merck & Co.; IVAX Corporation (which was acquired by and merged into Teva Pharmaceutical Industries Ltd.), which has 180day exclusivity at strengths other than 80 mg; and Dr. Reddy's Laboratories, also from India, whose authorized generic version (licensed by Merck) is exempt from exclusivity.

On 10 June 2008, Japan's Daiichi Sankyo Co. agreed to take a majority (50.1%) stake in Ranbaxy, with a deal valued at about $4.6 billion. Ranbaxy's Malvinder Singh remained as CEO after the transaction. Malvinder Singh also said that this was a strategical deal and not a sell out.
[4]

On 16 September 2008, the Food and Drug Administration issued two Warning Letters to Ranbaxy Laboratories Ltd. and an Import Alert for generic drugs produced by two manufacturing plants in India.[5] On February 25, 2009 the U.S. Food and Drug Administration said it has halted reviews of all drug applications including data developed at Ranbaxy's Paonta Sahib plant in India because of a practice of falsified data and test results in approved and pending drug applications. "Investigations revealed a pattern of questionable data," the FDA said.[6][7]

[edit] Acquisition
On June 11, 2008, Daiichi-Sankyo acquired a 34.8% stake in Ranbaxy,[8] for a value $2.4 billion. In November 2008, Daiichi-Sankyo completed the takeover of the company from the founding Singh family in a deal worth $4.6 billion[9] by acquiring a 63.92% stake in Ranbaxy. The addition of Ranbaxy Laboratories extends Daiichi-Sankyo's operations - already comprising businesses in 22 countries.[citation needed] The combined company is worth about $30 billion.[10]

[edit] See also

Daiichi to Take Control of Ranbaxy for $4.6 Billion (Update3)

June 11 (Bloomberg) -- Daiichi Sankyo Co. will buy a controlling stake in India's Ranbaxy Laboratories Ltd. for up to $4.6 billion to enter the generic-drug market, where sales are growing twice as fast as branded medicines. Daiichi Sankyo, Japan's third-largest drugmaker, will acquire more than 50.1 percent of Ranbaxy, India's biggest pharmaceutical company, for 737 rupees a share, 31 percent above yesterday's closing price, the Tokyo-based company said in a statement today. Ranbaxy's billionaire chief executive officer Malvinder Singh, 35, will keep his post and Ranbaxy will continue to trade on Indian stock exchanges. The purchase propels Daiichi Sankyo into the top 10 companies in the $120 billion genericpharmaceutical market, which grew 11 percent last year, compared with 6 percent for all drugs.

Daiichi Sankyo, the maker of the Benicar hypertension medicine, is mimicking Novartis AG and Johnson & Johnson in diversifying as sales of branded products slow. Price cuts in Japan mean Daiichi Sankyo's profit is likely to fall 18 percent this year as its main blood pressure treatments lose sales. ``Daiichi Sankyo's strategy follows Novartis and it's convincing,'' said Fumiyoshi Sakai, a healthcare analyst at Credit Suisse Securities Ltd. ``The essence of the deal is Daiichi Sankyo will seriously challenge generic businesses.'' Daiichi Sankyo shares rose the most in two months to 2,975 yen, gaining 4.9 percent at the close on the Tokyo Stock Exchange. Ranbaxy rose 0.25 rupees, or less than 1 percent, to 561 rupees in Mumbai trading. Expanding Market Basel, Switzerland-based Novartis used the 2005 takeovers of German generic-drug maker Hexal AG and Eon Labs Inc. of the U.S. to reduce its reliance on patent-protected drugs. It is buying Swiss eye-care maker Alcon Inc. to further that aim. New Brunswick, New Jersey-based J&J sells pharmaceuticals alongside consumer health and medical devices. Daiichi Sankyo is paying about 4.7 times Ranbaxy's sales in the acquisition, according to Bloomberg data. That compares with 2.7 times that Mylan Inc. paid last year when it bought Merck KGaA's generic unit for 4.9 billion euros ($7.6 billion). Stada Arzneimittel AG, Germany's third-largest maker of copied medicines, expects the genericdrug market to expand more than 10 percent a year to as much as 137 billion euros by 2012, compared with 6 percent growth for patent-protected products. Japanese rivals Takeda Pharmaceutical Co., Astellas Pharma Inc., and Eisai Co., have spent more than $14 billion on acquisitions since November 2007 to buffer sales declines as their bestselling drugs lose patent protection. Better Reach ``The acquisition will allow Daiichi Sankyo to have a better reach into emerging markets, including India, China and Eastern Europe,'' where the pharmaceutical market is growing at a rate of more than 10 percent, the company said in a statement. The Japanese pharmaceutical market will grow 1 percent to 2 percent this year, said IMS Health Inc., a Norwalk, Connecticut health-research firm, in November. Global industry growth will be 5 percent to 6 percent next year, it said. India's pharmaceutical market may expand by more than 12 percent a year, reaching $20 billion by 2015, McKinsey & Co. said in a report in August.

``This signals that there is a lot of value in the Indian pharmaceutical industry, said Jayesh Shroff, who helps manage $7.5 billion at SBI Asset Management Co. in Mumbai. ``The drugmakers have underperformed in the past three years. It's also a good signal for the overall market with about $4 billion in foreign direct investment coming in.'' Shares Trail Ranbaxy shares lost almost a third of their value in the past three years while the benchmark Sensitive Index, or Sensex, more than tripled. Singh is fighting legal battles with drugmakers for the right to sell cheap copies. The Indian company is trying to win the right to sell a version of Pfizer Inc.'s best-selling Lipitor treatment before the patent expires in 2010. On April 30, New York-based Pfizer said the U.S. Patent & Trademark Office will confirm the basic patent for its cholesterol medication, rejecting Ranbaxy's challenge. The Ranbaxy purchase gives Daiichi a company that manufactures and sells drugs in 56 countries from the current 21. It follows Daiichi's takeover of German biotechnology company U3 Pharma AG for 150 million euros on May 21 to gain cancer treatments. The Nikkei newspaper reported the Ranbaxy acquisition in its evening edition. Ranbaxy shares rose as much as 5.4 percent to 591.1 rupees in Mumbai trading after the Economic Times newspaper reported the company's owner may sell a stake, citing an unidentified person. Ranbaxy Purchases Ranbaxy has purchased seven companies in the past two and a half years, including Romania's Terapia SA. The company has been built over the past three decades by copying blockbuster drugs such as Merck & Co.'s Zocor cholesterol treatment drug and selling them for a fraction of the price in countries including France, Germany and the U.S. Ranbaxy aims for sales of $5 billion by 2012 and said it wants to be among the top five generic drugmakers in the U.S., the world's biggest drug market. The company, founded in 1961, had sales of 74.3 billion rupees ($1.73 billion) in the year ended Dec. 31. Daiichi Sankyo will buy the Singh family's entire 34.8 percent stake and a portion of about $1 billion of preferential stock Ranbaxy will issue. The sale will trigger a mandatory offer for 20 percent more from shareholders under Indian takeover rules. Government Plans The acquisition will help Japan to increase volume of copycat drugs as a part of government's plan to trim medical-care spending in the one of the most rapidly aging society.

``I welcome a decision by Daiichi Sankyo, a branded drugmaker, to seriously work on generic business,'' said Yoshihiko Yamamoto, an analyst at Nikko Cordial Securities Inc. in Tokyo. Medical costs will swell 70 percent to 56 trillion yen by 2025 from 33 trillion yen in 2005, the government estimates. Japan wants generics to account for 30 percent of prescriptions by 2012 from 17 percent to save about 500 billion yen. Policies favoring the use of generic drugs are also luring foreign companies, including Teva and Mylan Inc. Petah Tikva, Israel-based Teva, the world's largest generic-drug maker, is hiring as many as 193 people in Japan this year. To contact the reporter on this story: Kanoko Matsuyama in Tokyo at at [email protected] To contact the editor responsible for this story: Peter Langan at at [email protected].
Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email [email protected] to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/25a46440-3780-11dd-aabb-0000779fd2ac.html#ixzz1SqiWb3nF Daiichi Sankyo, Japans third-largest pharmaceutical company, is to take control of Ranbaxy Laboratories, Indias biggest generic drugs maker, in a cash deal worth up to $4.6bn. It is the biggest acquisition of a listed Indian company.

Ranbaxy retreats from China venture - Dec-29 Ranbaxy suffers 53% fall in US sales - Oct-26 Daiichi chief defends Ranbaxy deal - Aug-24 Hitch for pharmaceuticals odd couple - May-25 Ranbaxy may acquire FDA approved facilities - Jan-15
The deal gives the Japanese company access to its Indian rivals low-cost research and production facilities and strengthens its ability to capitalise on the fast-expanding generics sector in Japan. The combined group creates a hybrid of Ranbaxys core generic drug business and Daiichi Sankyos strength in patented medicines, a mix so far only adopted on any significant scale by Novartis of Switzerland. The deal reflects a recent pattern of international expansion by Japanese companies, which have been restructuring and buying abroad after traditionally focusing on their domestic market. The deal values Ranbaxy at Rs737 a share, a 31.4 per cent premium to Tuesdays closing share price and 53.5 per cent premium to the stocks average closing price in the previous three months. The takeover accentuates the global importance of Indias homegrown generic pharmaceuticals industry.

Japans Takeda Pharmaceutical bought US biotechnology company Millennium Pharmaceuticals this year for $8.8bn while Eisai said in December it would buy MGI Pharma of the US for $3.9bn. The family of Malvinder Mohan Singh, chief executive and managing director of Ranbaxy, will sell its 34.8 per cent stake but Mr Singh will remain chairman and chief executive. Daiichi will seek to buy additional shares to give it the majority of the voting capital. Takashi Shoda, president and chief executive of Daiichi Sankyo, said the deal would allow the company to enter emerging markets and complement its strength in innovation with the fast-growing business of non-proprietary pharmaceuticals. Mr Singh said: This is a stronger, more sustainable model. We will transform to a far stronger and larger operation. Daiichi Sankyo will also launch a tender offer to buy up to 20 per cent of Ranbaxy from the market as required under Indian stock market rules. The total transaction is expected to be worth between $3.4bn and $4.6bn. Ranbaxy and other Indian generic drugmakers have become increasingly aggressive in challenging the patents of innovative pharmaceutical companies and driving consolidation in the generic sector with the purchase of companies in Europe and the US. With Daiichis backing, the acquisition streak will only increase, said Mr Singh. There will be consolidation in generics globally and in India. Pharmaceutical makers in developed countries are battling the soaring costs of bringing new drugs to market and have been ramping up research and testing in emerging markets. Shares in Daiichi Sankyo, known for its high-blood pressure drug Benicar, rose almost 5 per cent after reports of the deal while Ranbaxys shares initally rose 4 per cent before closing broadly flat at Rs561. Religare Capital advised Ranbaxy and Nomura advised Daiichi