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    Merger Abbot Piramal

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    benvarr
    The document summarizes a merger deal between Piramal Healthcare Ltd., an Indian pharmaceutical company, and Abbott Laboratories, a large American healthcare company. In 2010, Abbott acquired Piramal's domestic branded formulations business for $3.72 billion. The deal strengthened Abbott's presence in India's high-growth pharmaceutical market and allowed Piramal to pay down debt and fund expansion. The valuation of 8 times sales and 30 times EBITDA was high compared to typical deals but reflected Piramal's profitable business and Abbott's strategic interest in India. The transaction was a slump sale of assets that transferred 350 of Piramal's brands to Abbott.

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    Merger Abbot Piramal

    Uploaded by

    benvarr
    253 views26 pages
    The document summarizes a merger deal between Piramal Healthcare Ltd., an Indian pharmaceutical company, and Abbott Laboratories, a large American healthcare company. In 2010, Abbott acquired Piramal's domestic branded formulations business for $3.72 billion. The deal strengthened Abbott's presence in India's high-growth pharmaceutical market and allowed Piramal to pay down debt and fund expansion. The valuation of 8 times sales and 30 times EBITDA was high compared to typical deals but reflected Piramal's profitable business and Abbott's strategic interest in India. The transaction was a slump sale of assets that transferred 350 of Piramal's brands to Abbott.

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    The document summarizes a merger deal between Piramal Healthcare Ltd., an Indian pharmaceutical company, and Abbott Laboratories, a large American healthcare company. In 2010, Abbott acquired Piramal's domestic branded formulations business for $3.72 billion. The deal strengthened Abbott's presence in India's high-growth pharmaceutical market and allowed Piramal to pay down debt and fund expansion. The valuation of 8 times sales and 30 times EBITDA was high compared to typical deals but reflected Piramal's profitable business and Abbott's strategic interest in India. The transaction was a slump sale of assets that transferred 350 of Piramal's brands to Abbott.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    253 views26 pages

    Merger Abbot Piramal

    Uploaded by

    benvarr
    The document summarizes a merger deal between Piramal Healthcare Ltd., an Indian pharmaceutical company, and Abbott Laboratories, a large American healthcare company. In 2010, Abbott acquired Piramal's domestic branded formulations business for $3.72 billion. The deal strengthened Abbott's presence in India's high-growth pharmaceutical market and allowed Piramal to pay down debt and fund expansion. The valuation of 8 times sales and 30 times EBITDA was high compared to typical deals but reflected Piramal's profitable business and Abbott's strategic interest in India. The transaction was a slump sale of assets that transferred 350 of Piramal's brands to Abbott.

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    Merger & Acquisition

    Group Members
    BENSON VARGHESE - 19
    SARITA SAPALIGA

    - 29 DHANANJAY JOSHI - 43 ANIL NAIR - 80

    Indian Pharmaceutical Industry


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

    terms 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

    M&A Deals in Pharma Industry


    Year June 2008 Target Company Ranbaxy Lab Acquirer company Daiichi Sankyo Co Ltd Deal Value ($mn) 4538.6

    August 2006
    July 2009 Dec 2009 May 2010

    Matrix Lab Ltd.


    Shantha Biotech Orchid chemical

    Mylan Inc
    Sanofi Aventis Hospira Inc

    530
    625.2 400 3720

    Piramal Healthcare Abbott Lab.

    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

    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 advanced medical products Abbott India In 1910 Abbott established its presence in India Abbott Healthcare Pvt. Ltd. Established on 1st January , 1997

    Growing Footprints in India?


    Emerging markets already represents over 20% of its

    total business. Abbott has been operating in India for 100 of its 122 years, and had several popular pharmaceutical brands. Abbot was languishing at 18, with 2.3 per cent market share 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 developed markets

    Initial Attempts by Abbott


    The company had agreed to buy Wockhardts nutrition

    business for Rs 620 crore before legal problems stalled the deal. It entered into a licensing agreement with Zydus Cadila to market 24 products in 15 emerging markets, with an option to add another 40.

    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 for the remaining 21%. Priced Rs 725-727 per share. Deal size - USD 1.8-1.9 billion.

    Initial M&A Attempts on Piramal


    Only two days before Abbott-Piramal deal

    annoucement, Bombay Stock Exchange asked the promoter to clarify on media reports that Pfizer might buy a controlling stake in Piramal Healthcare Limited.
    Piramal Healthcare had responded "We hereby

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

    M&A Deal
    Year Indian Player MNC Nature of deal Detail 2010 Piramal Healthcare Ltd. Abbott Healthcare Pvt. Ltd. Slump Sale - Piramals domestic branded formulation division -350 brands - 5,200 employees - Manufacturing factory at Himachal Pradesh

    Abbott Laboratories, USA

    Piramal Group (Promoter Group)

    100%

    52.1% CASH USD 3.72bn Piramal Healthcare Ltd. Public Shareholders

    Abott Healthcare Pvt. Ltd.

    47.9%

    Business Transfer Formulation Business

    Reasons buy :- Deal for Why did Abbott


    Abbott is following a Emerging market penetration

    strategy. Near saturation of the western market is bringing MNCs to India. New diversified business model of spreading its risk from cash-intensive, R&D-based, innovator drugs to the robust cash flow-generating branded generics Expand presence in high growth emerging market Biggest player in India with 7% market share

    Reason for Deal


    Why did Piramal sell : 45% of the business stays with Piramal Healthcare Money thats now coming can be used to retire some Rs 1,300 crores in debt It will also provide funds for expanding the existing businesses and for undertaking new businesses

    Piramal Health Care


    Year Ended

    Operating Income Break Up Healthcare Solutions Pharma Solutions Piramal Critical Care Piramal Diagnostic Services Limited Others Total

    % of Sales 54.50 24.1 8.9 5.6 6.9 100

    31-Mar-10 20,002.30 8,849.90 3,276.70 2,064.30 2,517.40 36,710.50

    31-Mar-09 % Growth 16,048.90 24.6 10,606.50 -16.6 1,316.00 149 1,689.60 22.2 3,150.10 -20.1 32,811.00 11.9

    Operating Income Break Up Pharma Solutions Piramal Critical Care Piramal Diagnostic Services Limited Others Investment Income Total

    % of Sales 50.8 19.3 9.7 3.4 16.70 100

    Year Ended 31-Mar-11 31-Mar-10 % Growth 10,205.80 9,393.60 8.6 3,876.80 3,276.70 18.3 1,958.40 1,770.40 10.6 687.90 500.10 37.6 3,358.30 921.70 264.4 20,087.2 15,862.50 26.6

    Deal Structure
    8x Sales 30x EBITDA

    USD 3.72 billion

    Long term Capital Gains Rs 3800 cr

    USD 2.12 billion Upfront payment

    Installment payment (USD 400 million each for next 4 years)

    - Not contingent upon any event taking place. - Not guaranteed by any bank

    Dad + Daughter - Bankers = $3.7 Billion Deal

    Particulars

    Amount

    Initial

    $2.12 billion

    Receivable after Present value factor (at the rate of 8.75 per cent discount rate) 6 months 0.958

    Present Value

    $1.216 billion payment net of LTCGT and payment to sister

    1st Instalment

    $400 million

    18 months

    0.881

    $354.8 million of Deferred Payment


    $324 million of Deferred Payment $298 sales andmillion of 22x Deferred Payment $274 million of Deferred Payment $2.4668billion

    2nd Instalment

    $400 million

    30 months

    0.810

    3rd Instalment

    $400 million 42 months 0.745 5.5x Sales and 20x EBITDA as against 4x

    EBITDA
    4th Instalment $400 million 54 months 0.685

    Total

    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 Indian market

    45% business stay

    Retirement of Rs 1300 debt

    Reasons for Slump Sale

    Fund existing Business and new businesses

    Debt-Equity ratio = 0.77 Some loans were secured against assets which were being sold off

    Special Dvidend

    Markets Reaction

    Demerger An alternative?

    Current Scenario Post merger effects


    57% decline in sales 2012 2011 2010 2009 2008

    Sales Turnover Excise Duty


    Net Sales Other Income Stock Adjustments Total Income

    1,174.00
    21.29 1,152.71 203.48 13.28 1,369.47

    1,619.74
    29.61 1,590.13 16,684.49 69.00 18,343.62

    2,711.74
    57.24 2,654.50 133.30 21.44 2,809.24

    2,386.95
    65.04 2,321.91 71.57 12.35 2,405.83

    2,001.26
    83.55 1,917.71 74.83 -4.13 1,988.4

    Mar '12 Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 34.51 34.51 0.00

    Mar '11 33.58 33.58 0.00

    Mar '10 41.80 41.80 0.00

    Mar '09 41.80 41.80 0.00

    Mar '08 41.80 41.80 0.00

    0.00
    11,106.27 0.00 11,140.78 225.45 966.67 1,192.12

    0.00
    11,664.93 0.00 11,698.51 197.07 89.20 286.27

    0.00
    1,458.83 0.00 1,500.63 406.53 254.43 660.96

    0.00
    1,147.22 0.00 1,189.02 448.01 528.85 976.86

    0.00
    974.67 0.00 1,016.47 151.17 353.12 504.29

    12,332.90

    11,984.78

    2,161.59

    2,165.88

    1,520.76

    Abbott The Way Ahead


    Synergies
    Regime for generics to be bioequivalent Cultural challenges

    Piramal The Way Ahead


    A company with a large market capitalization
    Cash in excess of its market value Other assets having substantial future value Piramals management

    Thank You.

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