I had written in a earlier post on how I was uncomfortable with the way Ranbaxy was shaping up after going thru its balance sheet. The stock was hovering around the 500 mark then.
Then came the news of the Daiichi takeover. I had written a post then on how it was a merger of two organisations that were struggling for different reasons, coming together and hoping to build something strong out of it. Stock moved to around the 600 mark and I sold off a large % of my very very small holding :-).
Now the US FDA has pulled up Ranbaxy. Not the first time though, Ranbaxy has a history of run-ins with the US FDA. Their US Hq got raided in FEB 2007. Here’s a link to that story. There are rumours of Daiichi exiting the deal flying around.
I now come to the reason for this post.
I read this interesting piece on Bloomberg. UBS pharma analyst Sonal Gupta states and I quote
"We believe there could be close to 50 percent downside to the stock if Daiichi Sankyo were to withdraw its current offer to buy a majority stake in the company,''.
So UBS believes that minus Daiichi taking over, Ranbaxy is worth only Rs 250 a share. Daiichi is buying Ranbaxy at nearly three times that at around Rs 729 per share.
UBS's call is building up a self fulfilling prophecy where based on the value assigned by UBS, would Daiichi withdraw the offer which would lead the stock to reach the 250 level.
What will Daiichi do? The soap opera continues …..
Then came the news of the Daiichi takeover. I had written a post then on how it was a merger of two organisations that were struggling for different reasons, coming together and hoping to build something strong out of it. Stock moved to around the 600 mark and I sold off a large % of my very very small holding :-).
Now the US FDA has pulled up Ranbaxy. Not the first time though, Ranbaxy has a history of run-ins with the US FDA. Their US Hq got raided in FEB 2007. Here’s a link to that story. There are rumours of Daiichi exiting the deal flying around.
I now come to the reason for this post.
I read this interesting piece on Bloomberg. UBS pharma analyst Sonal Gupta states and I quote
"We believe there could be close to 50 percent downside to the stock if Daiichi Sankyo were to withdraw its current offer to buy a majority stake in the company,''.
So UBS believes that minus Daiichi taking over, Ranbaxy is worth only Rs 250 a share. Daiichi is buying Ranbaxy at nearly three times that at around Rs 729 per share.
UBS's call is building up a self fulfilling prophecy where based on the value assigned by UBS, would Daiichi withdraw the offer which would lead the stock to reach the 250 level.
What will Daiichi do? The soap opera continues …..
3 comments:
Hi Ninad,
The Ranbaxy saga highlights the huge disparity in information available to insiders and common public. Ranbaxy says the FDA case has been going on for a long time, then how come it was not brought to the notice of shareholders? I hope Daiichi withdraw from the deal and the promoters are taught a lesson.
Hi Mahendra
It clearly hasnt been a great example of corporate governance all throughout the deal.
They announced the Pfizer agreement post the Daiichi deal. Clearly Daiichi would have been in the know on the Pfizer settlement at the time of the agreement.
Gurucharan Das who is on the board expressed surprise in his column and blog on the deal. Clearly the board was not kept in the loop.
And now the US FDA issue. Well I wouldnt want Daiichi to withdraw from the deal bcos I still have a few share left to sell :-)
Cheers
Ninad
Right Ninad, that's the sad part. Investors are the biggest sufferers of corporate misdeeds any which way.
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