Indian Ranbaxy receives bid from Daiichi Sankyo, Pfizer could make hostile counterbid

Last week Daiichi Sankyo, Japan’s third-largest drugmaker, offered USD 4.6 bln for 50.1% of Ranbaxy Laboratories, India’s largest pharmaceuticals producer.  On Friday, Bloomberg reported that Pfizer, the world’s largest drugmaker, could make a hostile bid for a 65% stake in the company. According to Krishnan Ramalingam, spokesman for Ranbaxy, “the deal with Daiichi is binding and sealed”, and the company can’t make any other comment. Vladimir Nesterenko: Ranbaxy’s valuation implied by Daiichi’s bid suggests that the most likely acquisition target in Ukraine, Darnitsa (Nord Star Pharmashare, 4SI1 GR: BUY) could be bought close to its current MCap of USD 620 mln (adjusted for a 86.3% stake in a Ukrainian subsidiary), which is nearly 30% above its MCap at placement in November last year. We estimate that Daiichi’s bid valued Ranbaxy at EV of ~USD 9.2 bln, implying 27x EV/EBITDA ’07 and 42x P/E ’07. In terms of forward multiples, the bid implies 25x EV/EBITDA ’09, and 38x P/E ’09. Ranbaxy’s premium over Darnitsa could be justified by dominant market positions and higher growth.