merger abbot piramal

7/29/2019 merger Abbot Piramal

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Merger & Acquisition


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Group Members BENSON VARGHESE - 19

SARITA SAPALIGA - 29

DHANANJAY JOSHI - 43

ANIL NAIR - 80


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Indian Pharmaceutical Industry

3rd largest in the world in terms of volume and ranks 13th interms of value

Industry is growing 14% p.a

Industry size - US $12.6 billion India as an emerging market

Expansion of medical infrastructure

Top pharma companies Ranbaxy Lab

Dr, Reddys Lab

Aurobindo Pharmaceutical

GSK India

Cipla


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M&A Deals in Pharma IndustryYear Target Company Acquirer

companyDeal Value ($mn)

June 2008 Ranbaxy Lab Daiichi Sankyo CoLtd

4538.6

August 2006 Matrix Lab Ltd. Mylan Inc 530

July 2009 Shantha Biotech Sanofi Aventis 625.2

Dec 2009 Orchid chemical Hospira Inc 400

May 2010 Piramal Healthcare Abbott Lab. 3720


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PIRAMAL HEALTHCARE LTD. Initially known as Nicholas Piramal India Ltd, 1988

One of the top 10 custom manufacturing Pharma

companies in India, Europe and North America. 350 branded generic products

One of largest formulation plant in india

Consolidated revenues of US$450million in FY2012


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ABBOTT

Founded in 1888 by young Chicago Doctor, Wallace C.Abbott

90000 + people were employed over 130 countries

Abbott revenue - US $38.85 Billion

Market leading pharmaceuticals with advancedmedical products

Abbott India-

In 1910 Abbott established its presence in IndiaAbbott Healthcare Pvt. Ltd. -

Established on 1st January , 1997


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Growing Footprints in India? Emerging markets already represents over 20% of its

total business.

Abbott has been operating in India for 100 of its 122years, and had several popular pharmaceutical brands.

Abbot was languishing at 18, with 2.3 per cent marketshare and Solvay was at 35th position in the

formulation sales pecking order. Emerging markets will grow by 14% to 17% between

now and 2014, compared with 3% to 6% in developedmarkets


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Initial Attempts by Abbott The company had agreed to buyWockhardts nutrition

business for Rs 620 crore before legal problems stalledthe deal.

It entered into a licensing agreement with ZydusCadila to market 24 products in 15 emerging markets,with an option to add another 40.


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Initial M&A Attempts on Piramal Rumours in May 2010 about Pfizer buying 51% in

Piramal

30% stake from the promoters and an open offer forthe remaining 21%.

Priced Rs 725-727 per share.

Deal size - USD 1.8-1.9 billion.


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Initial M&A Attempts on Piramal Only two days before Abbott-Piramal deal

annoucement, Bombay Stock Exchange asked thepromoter to clarify on media reports that Pfizer mightbuy a controlling stake in Piramal Healthcare Limited.

Piramal Healthcare had responded "We hereby

confirm that there is no proposal by the Promoter forselling any stake in the Company."


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M&A DealYear 2010

Indian Player Piramal Healthcare Ltd.

MNC Abbott Healthcare Pvt. Ltd.

Nature of deal Slump Sale

Detail - Piramals domestic brandedformulation division-350 brands

- 5,200 employees- Manufacturing factory at HimachalPradesh


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Piramal Group

(PromoterGroup)

FormulationBusiness

Abott HealthcarePvt. Ltd.

PiramalHealthcare Ltd.

PublicShareholders

Abbott

Laboratories,USA

100%

47.9%

52.1%

CASH USD3.72bn

BusinessTransfer


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Reasons for DealWhy did Abbott buy :- Abbott is following a Emerging market penetration

strategy.

Near saturation of the western market is bringing MNCs toIndia.

New diversified business model of spreading its risk fromcash-intensive, R&D-based, innovator drugs to the robustcash f low-generating branded generics

Expand presence in high growth emerging market Biggest player in India with 7% market share


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Reason for DealWhy did Piramal sell :-

45% of the business stays with Piramal Healthcare

Money thats now coming can be used to retiresome Rs 1,300 crores in debt

It will also provide funds for expanding theexisting businesses and for undertaking newbusinesses


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Piramal Health Care

Year Ended

Operating Income Break Up % of Sales 31-Mar-10 31-Mar-09 % Growth

Healthcare Solutions 54.50 20,002.30 16,048.90 24.6

Pharma Solutions 24.1 8,849.90 10,606.50 -16.6

Piramal Critical Care 8.9 3,276.70 1,316.00 149

Piramal Diagnostic Services Limited 5.6 2,064.30 1,689.60 22.2

Others 6.9 2,517.40 3,150.10 -20.1

Total 100 36,710.50 32,811.00 11.9

Year Ended

Operating Income Break Up % of Sales 31-Mar-11 31-Mar-10 % Growth

Pharma Solutions 50.8 10,205.80 9,393.60 8.6

Piramal Critical Care 19.3 3,876.80 3,276.70 18.3Piramal Diagnostic Services Limited 9.7 1,958.40 1,770.40 10.6

Others 3.4 687.90 500.10 37.6

Investment Income 16.70 3,358.30 921.70 264.4

Total 100 20,087.2 15,862.50 26.6


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Deal Structure

USD 3.72 billion

USD 2.12 billion

Upfront payment

Installmentpayment (USD

400 million eachfor next 4 years)

Dad + Daughter - Bankers = $3.7 Billion Deal

- Not contingentupon any eventtaking place.- Not guaranteedby any bank

Long termCapital Gains Rs 3800 cr

8x Sales30x EBITDA


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5.5x Sales and 20x EBITDA as against 4x sales and 22xEBITDA

Particulars mount Receivable afterPresent valueactor (at the

rate of 8.75 percent discount

rate)

Present Value

Initial $2.12 billion 6 months 0.958 $1.216 billionpayment net ofLTCGT andpayment to sister

1st Instalment $400 million 18 months 0.881 $354.8 million ofDeferredPayment

2nd Instalment $400 million 30 months 0.810 $324 million ofDeferredPayment

3rd Instalment $400 million 42 months 0.745 $298 million ofDeferredPayment

4th Instalment $400 million 54 months 0.685 $274 million ofDeferredPayment

Total $2.4668billion


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Reasons for High Valuation The domestic branded generic business most

profitable segment for Indian firms

Piramal's business - 25% CAGR in the past two years Fifth largest player in the Indian market.

Non-compete covenant for eight years

The trick was perhaps in choosing a buyer who was

desperate to have a bigger say in the domestic Indianmarket


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Debt-Equity ratio = 0.77Some loans were securedagainst assets which were

being sold off

Reasonsfor Slump

Sale

45% businessstay

Fundexisting

Business andnew

businesses

SpecialDvidend

Retirementof Rs 1300

debt


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Markets Reaction


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Demerger An alternative?


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Current Scenario Post merger

effects

2012 2011 2010 2009 2008

SalesTurnover 1,174.00 1,619.74 2,711.74 2,386.95 2,001.26

Excise Duty 21.29 29.61 57.24 65.04 83.55

Net Sales 1,152.71 1,590.13 2,654.50 2,321.91 1,917.71

OtherIncome

203.48 16,684.49 133.30 71.57 74.83

StockAdjustments

13.28 69.00 21.44 12.35 -4.13

Total Income 1,369.47 18,343.62 2,809.24 2,405.83 1,988.4

57% decline insales


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Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

Total ShareCapital

34.51 33.58 41.80 41.80 41.80

Equity Share

Capital 34.51 33.58 41.80 41.80 41.80Share

pplicationMoney

0.00 0.00 0.00 0.00 0.00

Preference

Share Capital

0.00 0.00 0.00 0.00 0.00

Reserves 11,106.27 11,664.93 1,458.83 1,147.22 974.67

RevaluationReserves

0.00 0.00 0.00 0.00 0.00

Networth 11,140.78 11,698.51 1,500.63 1,189.02 1,016.47

Secured Loans 225.45 197.07 406.53 448.01 151.17

UnsecuredLoans

966.67 89.20 254.43 528.85 353.12

Total Debt 1,192.12 286.27 660.96 976.86 504.29

TotalLiabilities 12,332.90 11,984.78 2,161.59 2,165.88 1,520.76


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Abbott The Way Ahead Synergies

Regime for generics to be bioequivalent

Cultural challenges


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Piramal The Way AheadA company with a large market capitalization

Cash in excess of its market value

Other assets having substantial future value

Piramals management


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Thank You.

merger abbot piramal

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