ds retreats from india with $3.2bn

http://www.reuters.com/article/2014/04/07/us-daiichi-sankyo-ranbaxy-sunpharma-idUSBREA3600L20140407

India's Sun Pharma to buy struggling Ranbaxy for $3.2 billion as Daiichi Sankyo retreats

"(Reuters) - India's Sun Pharmaceutical Industries Ltd (SUN.NS) has agreed to buy generic drugmaker Ranbaxy Laboratories Ltd (RANB.NS) for $3.2 billion, betting it can fix factory quality glitches that plagued the current owner, Japan's Daiichi Sankyo Co (4568.T), and got Ranbaxy India-made drugs barred from the United States.

The all-share transaction, the biggest pharmaceutical sector deal in the Asia-Pacific region this year, will create the world's fifth-largest maker of generic drugs. The acquisition comes as the pace of consolidation increases in a market that's primed for growth in the U.S. and emerging markets and could be worth $335 billion globally by 2017, according to Lucintel.

For Daiichi Sankyo, Japan's fourth-biggest drugmaker by revenue, the deal marks a significant retreat and highlights the lingering quality problems facing India's drug industry. The value of the Japanese firm's investments in the country has been halved since it bought control of Ranbaxy in 2008.

The deal comes against the backdrop of a slew of sanctions against Ranbaxy by the U.S. Food and Drug Administration (FDA) due to concerns about manufacturing processes at its India plants. Sun Pharma's strong sales base in the U.S., along with India supply chain management that has been tight enough to meet FDA standards in most cases and a good record in managing troubled acquisitions, made the firm an attractive buyer for Daiichi Sankyo...

...The deal relieves Daiichi Sankyo of a troubled subsidiary that has diverted resources and weighed on profits - at a price.

Under the deal, expected to close by year-end, the Japanese company will end up with a stake of about 9 percent in Sun Pharma valued at about $2 billion, compared with the $4.2 billion it paid for a 63.9 percent stake in Ranbaxy in 2008...

...Daiichi Sankyo Chief Executive Joji Nakayama said Daiichi had learnt a lot about emerging markets through its relationship with Ranbaxy and saw those lessons as valuable for its further global expansion. The Ranbaxy deal was intended to establish a 'hybrid' business model offering generic medicines as well as innovative brands sold by the Japanese firm.

The company wrote down 359.5 billion yen ($3.5 billion) in 2009 to cover a drop in value of its initial investment after regulatory problems in the U.S. triggered a sharp fall in Ranbaxy's share price. The stock has since recovered, more than doubling since a March 2009 trough.

"We don't think we can make much progress in emerging markets with just innovative medicines," said Nakayama, speaking at a news conference in Tokyo. "So we are exploring many different possibilities for emerging markets, including tying up with local partners and we believe that will expand our business chances."

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