All eyes on Ranbaxys shareholders

Written by Markets Bureau | Mumbai, Jun 11 | Updated: Jun 13 2008, 04:40am hrs
Japan's second largest drug maker Daiichi Sankyo Company Ltd's decison to buy out Ranbaxy promoters' 35% stake in the Indian pharma major and make an open offer for acquiring another 20% to the public shareholders of the company at the rate of Rs 737 per share is definitely going to be an interesting option to the existing Ranbaxy shareholders, as the offer price will be 31% above company's Wednesday's closing price of Rs 560.80.

However, the market price is expected to revolve around the offer price by the time the open offer is schedule is announced. Also, an interesting twist is that whether Ranbaxy shareholders should submit their holding in the Daiichi's open offer or not

Daiichi was established in 2005 after the merger of two leading century-old Japanese pharmaceutical companies, is one of the largest pharmaceutical company in Japan. The company focuses on therapeutic areas like cardiovascular disease, cancer, metabolic disorders, and infection and has a robust product line-up and R&D pipeline.

Assuming that the entire public shareholding of 65% (including the institutional investors) is tendered in the offer, the level of acceptance will be around 31%. That means if a shareholder having 100 shares tenders all of them in the offer, the management will accept only 31 shares at Rs 737 per share in the offer and remaining 69 shares will be returned to him.

However, the chances of entire 65% of the public shareholding being tendered in the offer is very remote and hence the level of acceptance of the shares is gloing to rise and depending upon the response to the offer, the number of shares that will be returned will be decided.

According to analysts, whether the Ranbaxy shareholders should participate in the offer depends on how the things shape up in the future with respect to the new entity. As it is, Ranbaxy as a stock has not given encouraging return in past few months or even years. So if one wants make an exit from the counter, the open offer is the right opportunity to partially make the profit. However, if the new entity emerges as a stronger one, which is more likely the possibility, holding on to the shares may not only pay the better dividend but also enhance the yield, they concluded.