Drug maker gains on news of hostile bid

By Sumit Sharma  |   2008-6-14  |     NEWSPAPER EDITION

RANBAXY Laboratories Ltd, India's biggest drug maker, rose to the highest in more than three years following a Business Standard report that Pfizer Inc may make a hostile bid, trumping an agreed takeover by Daiichi Sankyo Co.

Ranbaxy advanced as much as 5.6 percent and Pfizer's India unit gained 17.4 percent. Daiichi fell 2.4 percent in Tokyo. Pfizer, the world's largest drug maker, may offer to buy the 65 percent of Ranbaxy that's not held by the founding Singh family, the Standard said yesterday. Pfizer and Daiichi declined to comment, said Bloomberg News.

Daiichi Sankyo agreed to pay as much as US$4.6 billion for 50.1 percent of Ranbaxy to enter the generic-drug market where sales are growing twice as fast as branded medicines. Any bid may have to beat the 737 rupees that Daiichi Sankyo is offering, a 29-percent premium to Ranbaxy's 572 rupee price.

"An offer can be made, but without the concurrence of the promoters it is difficult for such a bid to succeed in the Indian context," said A. K. Sridhar, chief executive officer at UTI International (Singapore) Pvt.

"Usually institutions look at the long term before deciding one way or the other."

A battle for Ranbaxy may bolster shares of a company that have lagged behind the benchmark index for the past three years. Ranbaxy has waged a costly legal battle with Pfizer in the United States and Europe over the right to sell cheaper versions of blockbuster drugs led by cholesterol treatment Lipitor.

"The deal with Daiichi is binding and sealed," Krishnan Ramalingam, spokesman for Ranbaxy, said on his mobile phone. "We can't make any other comment."

Daiichi Sankyo, based in Tokyo, wants to buy Ranbaxy to break into the top 10 companies in the US$120-billion generic-pharmaceutical market, which grew 11 percent last year, compared with 6 percent for all drugs. Daiichi, Japan's third-largest drug maker, agreed to buy the entire 34.8 percent held by Ranbaxy's Chief Executive Officer Malvinder Singh.