India Inc, which prides itself on recent landmark global acquisitions, received a rude shock on Wednesday. This time, the target was an Indian bluechip and the predator, Japanese. In the largest-ever buyout of a listed Indian entity, Japan?s second-largest pharmaceutical company, Daiichi Sankyo, has announced that it would acquire over 51% stake in Ranbaxy Laboratories Ltd, India?s largest pharma firm, at Rs 737 a share.

The transaction is valued in the range of $3.4-$4.6 billion. The Ranbaxy founders will offload their entire 34.8% controlling stake to Daiichi Sankyo at 31% over the stock?s Tuesday closing price. ?This purchase price represents a premium of 53.5% to Ranbaxy?s average daily closing price on the NSE for the three months ending on June 10, 2008,? stated a release issued by the two companies on Wednesday.

This marks the end of the Singh family?s ownership of the company, although Malvinder Singh will continue as CEO & managing director, while additionally assuming the position of chairman of the board, upon closure of the deal. ?On post-closing basis, the transaction would value Ranbaxy at $8.5 billion,? Daiichi Sankyo president & CEO Takashi Shoda said at a press conference.

Ranbaxy shares closed at Rs 560.75 on the BSE on Wednesday, a marginal rise from Tuesday?s close of Rs 560.80. The buyout will also include the mandatory open offer to public shareholders for 20% of Ranbaxy shares at the same acquisition price of Rs 737 a share. The acquisition will be completed by the end of March 2009.

Ranbaxy is expected to become a subsidiary of Daiichi Sankyo. Shoda said the deal would be financed through a mix of bank debt and his company?s cash reserves. The binding share purchase and share subscription agreement commits Daiichi Sankyo to buying out the Singh family stake at Rs 737 a share by that time. The boards of both companies have approved the agreement, said Shoda.

The board of the new entity will have ten members?six from Daiichi Sankyo and the rest from Ranbaxy. ?The proposed transaction will help us in becoming a global pharma innovator and provides us with a strong presence in non-proprietary pharmaceuticals,? added Shoda.

Singh said the deal would put Ranbaxy on a new and much stronger platform to harness its capabilities in drug development, manufacturing and global reach. ?Together with our pool of scientific, technical and managerial resources and talent, we would enter a new orbit to chart a higher trajectory of sustainable growth,? he said. According to Singh, Ranbaxy will continue to be listed on the Indian stock exchange and status quo would be maintained for all previous deals, including those with AstraZeneca and Orchid Chemicals.

Japan?s Daiichi buys

Ranbaxy for $4.6 billion

?The deal gives us enough liquidity to pursue our aggressive acquisition plans and strategic alliances without restraint,? Singh added.

Frost & Sullivan healthcare industry analyst Shivani Shukla said, ?In one shot, the deal gives Daiichi access to Ranbaxy?s strong network, infrastrucutre and marketshare. Ranbaxy, on the other hand, will benefit from the Japanese firm?s research capabilities.?

Shukla said consolidation is the name of the game in the industry worldwide. She added that Daiichi

Sankyo Company itself was established in 2005 after the merger of two leading century-old Japanese pharma companies.