Post on 04-Apr-2018
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Merger & Acquisition
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Group Members BENSON VARGHESE - 19
SARITA SAPALIGA - 29
DHANANJAY JOSHI - 43
ANIL NAIR - 80
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Indian Pharmaceutical Industry
3rd largest in the world in terms of volume and ranks 13th interms of value
Industry is growing 14% p.a
Industry size - US $12.6 billion India as an emerging market
Expansion of medical infrastructure
Top pharma companies Ranbaxy Lab
Dr, Reddys Lab
Aurobindo Pharmaceutical
GSK India
Cipla
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M&A Deals in Pharma IndustryYear Target Company Acquirer
companyDeal Value ($mn)
June 2008 Ranbaxy Lab Daiichi Sankyo CoLtd
4538.6
August 2006 Matrix Lab Ltd. Mylan Inc 530
July 2009 Shantha Biotech Sanofi Aventis 625.2
Dec 2009 Orchid chemical Hospira Inc 400
May 2010 Piramal Healthcare Abbott Lab. 3720
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PIRAMAL HEALTHCARE LTD. Initially known as Nicholas Piramal India Ltd, 1988
One of the top 10 custom manufacturing Pharma
companies in India, Europe and North America. 350 branded generic products
One of largest formulation plant in india
Consolidated revenues of US$450million in FY2012
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ABBOTT
Founded in 1888 by young Chicago Doctor, Wallace C.Abbott
90000 + people were employed over 130 countries
Abbott revenue - US $38.85 Billion
Market leading pharmaceuticals with advancedmedical products
Abbott India-
In 1910 Abbott established its presence in IndiaAbbott Healthcare Pvt. Ltd. -
Established on 1st January , 1997
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Growing Footprints in India? Emerging markets already represents over 20% of its
total business.
Abbott has been operating in India for 100 of its 122years, and had several popular pharmaceutical brands.
Abbot was languishing at 18, with 2.3 per cent marketshare and Solvay was at 35th position in the
formulation sales pecking order. Emerging markets will grow by 14% to 17% between
now and 2014, compared with 3% to 6% in developedmarkets
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Initial Attempts by Abbott The company had agreed to buyWockhardts nutrition
business for Rs 620 crore before legal problems stalledthe deal.
It entered into a licensing agreement with ZydusCadila to market 24 products in 15 emerging markets,with an option to add another 40.
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Initial M&A Attempts on Piramal Rumours in May 2010 about Pfizer buying 51% in
Piramal
30% stake from the promoters and an open offer forthe remaining 21%.
Priced Rs 725-727 per share.
Deal size - USD 1.8-1.9 billion.
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Initial M&A Attempts on Piramal Only two days before Abbott-Piramal deal
annoucement, Bombay Stock Exchange asked thepromoter to clarify on media reports that Pfizer mightbuy a controlling stake in Piramal Healthcare Limited.
Piramal Healthcare had responded "We hereby
confirm that there is no proposal by the Promoter forselling any stake in the Company."
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M&A DealYear 2010
Indian Player Piramal Healthcare Ltd.
MNC Abbott Healthcare Pvt. Ltd.
Nature of deal Slump Sale
Detail - Piramals domestic brandedformulation division-350 brands
- 5,200 employees- Manufacturing factory at HimachalPradesh
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Piramal Group
(PromoterGroup)
FormulationBusiness
Abott HealthcarePvt. Ltd.
PiramalHealthcare Ltd.
PublicShareholders
Abbott
Laboratories,USA
100%
47.9%
52.1%
CASH USD3.72bn
BusinessTransfer
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Reasons for DealWhy did Abbott buy :- Abbott is following a Emerging market penetration
strategy.
Near saturation of the western market is bringing MNCs toIndia.
New diversified business model of spreading its risk fromcash-intensive, R&D-based, innovator drugs to the robustcash f low-generating branded generics
Expand presence in high growth emerging market Biggest player in India with 7% market share
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Reason for DealWhy did Piramal sell :-
45% of the business stays with Piramal Healthcare
Money thats now coming can be used to retiresome Rs 1,300 crores in debt
It will also provide funds for expanding theexisting businesses and for undertaking newbusinesses
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Piramal Health Care
Year Ended
Operating Income Break Up % of Sales 31-Mar-10 31-Mar-09 % Growth
Healthcare Solutions 54.50 20,002.30 16,048.90 24.6
Pharma Solutions 24.1 8,849.90 10,606.50 -16.6
Piramal Critical Care 8.9 3,276.70 1,316.00 149
Piramal Diagnostic Services Limited 5.6 2,064.30 1,689.60 22.2
Others 6.9 2,517.40 3,150.10 -20.1
Total 100 36,710.50 32,811.00 11.9
Year Ended
Operating Income Break Up % of Sales 31-Mar-11 31-Mar-10 % Growth
Pharma Solutions 50.8 10,205.80 9,393.60 8.6
Piramal Critical Care 19.3 3,876.80 3,276.70 18.3Piramal Diagnostic Services Limited 9.7 1,958.40 1,770.40 10.6
Others 3.4 687.90 500.10 37.6
Investment Income 16.70 3,358.30 921.70 264.4
Total 100 20,087.2 15,862.50 26.6
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Deal Structure
USD 3.72 billion
USD 2.12 billion
Upfront payment
Installmentpayment (USD
400 million eachfor next 4 years)
Dad + Daughter - Bankers = $3.7 Billion Deal
- Not contingentupon any eventtaking place.- Not guaranteedby any bank
Long termCapital Gains Rs 3800 cr
8x Sales30x EBITDA
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5.5x Sales and 20x EBITDA as against 4x sales and 22xEBITDA
Particulars mount Receivable afterPresent valueactor (at the
rate of 8.75 percent discount
rate)
Present Value
Initial $2.12 billion 6 months 0.958 $1.216 billionpayment net ofLTCGT andpayment to sister
1st Instalment $400 million 18 months 0.881 $354.8 million ofDeferredPayment
2nd Instalment $400 million 30 months 0.810 $324 million ofDeferredPayment
3rd Instalment $400 million 42 months 0.745 $298 million ofDeferredPayment
4th Instalment $400 million 54 months 0.685 $274 million ofDeferredPayment
Total $2.4668billion
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Reasons for High Valuation The domestic branded generic business most
profitable segment for Indian firms
Piramal's business - 25% CAGR in the past two years Fifth largest player in the Indian market.
Non-compete covenant for eight years
The trick was perhaps in choosing a buyer who was
desperate to have a bigger say in the domestic Indianmarket
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Debt-Equity ratio = 0.77Some loans were securedagainst assets which were
being sold off
Reasonsfor Slump
Sale
45% businessstay
Fundexisting
Business andnew
businesses
SpecialDvidend
Retirementof Rs 1300
debt
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Markets Reaction
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Demerger An alternative?
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Current Scenario Post merger
effects
2012 2011 2010 2009 2008
SalesTurnover 1,174.00 1,619.74 2,711.74 2,386.95 2,001.26
Excise Duty 21.29 29.61 57.24 65.04 83.55
Net Sales 1,152.71 1,590.13 2,654.50 2,321.91 1,917.71
OtherIncome
203.48 16,684.49 133.30 71.57 74.83
StockAdjustments
13.28 69.00 21.44 12.35 -4.13
Total Income 1,369.47 18,343.62 2,809.24 2,405.83 1,988.4
57% decline insales
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Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
Total ShareCapital
34.51 33.58 41.80 41.80 41.80
Equity Share
Capital 34.51 33.58 41.80 41.80 41.80Share
pplicationMoney
0.00 0.00 0.00 0.00 0.00
Preference
Share Capital
0.00 0.00 0.00 0.00 0.00
Reserves 11,106.27 11,664.93 1,458.83 1,147.22 974.67
RevaluationReserves
0.00 0.00 0.00 0.00 0.00
Networth 11,140.78 11,698.51 1,500.63 1,189.02 1,016.47
Secured Loans 225.45 197.07 406.53 448.01 151.17
UnsecuredLoans
966.67 89.20 254.43 528.85 353.12
Total Debt 1,192.12 286.27 660.96 976.86 504.29
TotalLiabilities 12,332.90 11,984.78 2,161.59 2,165.88 1,520.76
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Abbott The Way Ahead Synergies
Regime for generics to be bioequivalent
Cultural challenges
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Piramal The Way AheadA company with a large market capitalization
Cash in excess of its market value
Other assets having substantial future value
Piramals management
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Thank You.