Mergers & Acquisition

Abbott Healthcare pvt. ltd acquires Piramal Healthcare ltd

INDEX
1. 2. 3. 4. Introduction to merger & acquisition What are mergers & acquisition Distinction between merger & acquisition Abbott takeover Piramal y Introduction y Summary of deal Abbott laboratories Ltd. Introduction Piramal healthcare Introduction Brief snapshot of the deal Parties involved in the transaction Structure of the transaction Overview of the deal Chronology of events Why did Piramal sell? Why did Abbott buy? According to the market prospects Future of the Piramal healthcare Epilogue Conclusion

5.
y

6.
y

7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

Introduction to Mergers and Acquisitions

One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A.

This rationale is particularly alluring to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or to achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone.

What Are Mergers And Acquisitions ?

With most business terms, it is good to take a quick look at the words or basic terms used. In some cases, corporations and business consultants construct titles for processes that seem to mask true meaning. To merge is to cause separate items to combine or unite. This action may also include blending as well as blurring the individual characteristics of two or more entities. In some cases, merging results in one or more of the items disappearing or being swallowed by another.

The term merger has come to be a business term. It refers to a legal joining or combining of two or more companies, when the individual property and assets are moved to ownership status with one company. The individual businesses combine, though in truth, one may be swallowed by another. On the other hand, acquisition means that one entity has acquired another, or gained possession of another. The foundations of this interesting word reach back more than 600 years, when large landholdings were taken over by the owner of another set of holdings. What does this mean in the modern world of business? In simple form, a merger still means the same as it did centuries ago. Two companies that have been operating independently pool resources such as personnel, inventory and financial assets, with a new company established to control and direct those assets. In short, the two original companies dont exist as they did before, in a legal sense. However, the reality of modern business allows the term merger to be a bit of a hybrid, as when one company takes on the assets and liabilities of another, with the first keeping its identity. In this case, a merger is a form of acquisition, rather than a true merger. One analyst looks at this in a metaphor: River A merges with River B and the single resulting stream is River AB. In the hybrid merger, River A merges with River B and the resulting stream is still called River A.

Companies may join forces to get some advantage under tax law, or they may combine to do business on a much larger scale. When one company retains its identity after a merger it may realize more benefit, in that the public continues to

recognize its original name. The combination may have been made to strengthen the resulting company by adding needed customers and resources from a smaller firm that is part of the merger. The complexities of mergers and acquisitions are quite complex in the modern, global business atmosphere. In recent years, some have taken to calling the merger of a smaller company with a larger (that exists after the merger) a harvesting of assets and other value that is inherent in the smaller firm. Both companies may look at this action as diversification, though the benefits may vary for each. As the business world grows more complex, and the reach of a company extends around the globe, new terms may come into play simply to define what has happened between two companies. Consolidation is the term that has recently been applied to the true combination of firms into a new company altogether.

Distinction between Mergers and Acquisitions:

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created.

In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders.

Abbott takeover Piramal

Introduction
Affluent pharmaceutical giants from the West Abbott Laboratories are in pursuit of their counterparts in the East to consolidate their presence and business in the emerging markets i.e in India . The acquisition of domestic formulations business including mass market branded formulations business (the Formulation Business) by Abbott Healthcare Private Limited (AHPL), an Indian subsidiary of Abbott Laboratories, USA (Abbott Lab), from Piramal Healthcare Limited (Piramal Healthcare / Company) (Transaction) is the latest in a wave of consolidation within the global pharmaceutical industry over the past few years. In this M&A Lab, we make a deeper probe into the Abbott Piramal Healthcare deal which catapults Abbott Lab to numero uno position in the Indian pharmaceutical market, one of the most attractive and rapidly growing branded generics market. As always, we seek to analyze the legal, regulatory, tax and few commercial dimensions of this transaction. Here, in India, Where Domestic markets are increasing day by day, there is a strong need for competitors in the market, whereby they can not only face competition but also maintain pressure on other companies to form challenging products with quality and make their presence felt.

Summary of the deal

On May 21, 2010, Piramal Healthcare declared the execution of definitive agreements with Abbott Lab for sale of its Formulation Business to AHPL India (Abbott Healthcare Private Limited). It was not an easy catch for Abbott Lab. that had to outbid a number of prospective acquirers to win this Formulation Business from the Piramal Healthcare. The transaction, structured as a slump sale / business transfer, would result in Piramal Healthcare selling the Formulation Business to AHPL as a going concern excluding cash and cash equivalents (Business Transfer). Valued at about 9.4 times the sales, the acquisition of the Formulation Business is being done for a total consideration of USD 3.72 billion. The assets transferred include Piramal Healthcare s manufacturing facilities at Baddi, Himachal Pradesh and rights to approximately 350 brands and trademarks and the employees of the Formulation Business. The deal offers Abbott Lab a combined 7% market share in the Indian generic market and makes Abbott Lab the single largest player in the Indian pharmaceutical sector. Further, the deal provides Abbott Lab, the much required access to other emerging markets. Piramal Healthcare s retained business inter alia include custom manufacturing for third parties, critical care (including inhalation anesthetics), Over-the-Counter consumer products, manufacture and supply of active pharmaceutical ingredients, diagnostic medical devices and diagnostic services, including pathology laboratories and radiology centers and clinical research services. As per the commercials, Piramal Healthcare shall pay Piramal Enterprises Ltd. (Piramal Enterprises) INR 3,500 million (approximately USD 75 million for providing guarantee to Abbott Lab for the performance of all the obligations of Piramal Healthcare and its affiliates in connection with the Transaction. This payment

also includes payment towards Non-compete provision prohibiting Piramal Enterprises Ltd., Piramal Healthcare and its affiliates from manufacturing generic drugs to be sold in India and other emerging markets for a period of eight years.

Abbott Laboratories Ltd. (A Promise For Life)

Introduction In 1888 at the age of 30, Dr. Wallace C. Abbott, founded the Abbott Alkaloidal Company. At the time he was a practicing physician and owned a drug store. His innovation was the use of the active part of a medicinal plant, generally an alkaloid, which he formed into tiny pills which he called dosimetric granules. This was successful since it allowed more consistent and effective dosages for patients. Like most large drug manufacturers, Abbott has experienced its share of product liability disasters. The most notorious by far involved its production of diethylstilbestrol (DES), which was later discovered to cause birth defects (i.e., be a teratogen). This gave the Supreme Court of California the opportunity to develop market-share liability in the landmark case of Sindell v. Abbott Laboratories (1980). Abbott Laboratories (NYSE: ABT) is a pharmaceuticals health care company. It has 72,000 employees and operates in over 130 countries.[3] The company headquarters are in Abbott Park, North Chicago, Illinois. The company was founded

by Chicago physician, Dr. Wallace Calvin Abbott in 1888. In 2008, Abbott had over $29 billion in revenue. In 1985, the company developed the first HIV blood screening test., moderate to severe chronic psoriasis and juvenile idiopathic arthritis; Norvir, a treatment for HIV; Depakote, an anticonvulsant drug; and Synthroid, a synthetic thyroid hormone. Abbott also has a broad range of medical devices, diagnostics and immunoassay products as well as nutritional products, including Ensure, a line of well known meal replacement shakes, and EAS, the largest producer of performance based nutritional supplements. Abbott's in vitro diagnostics business is a world leader in immunoassays and blood screening. Abbott's broad range of medical tests and diagnostic instrument systems are used worldwide by hospitals, laboratories, blood banks, and physician offices to diagnose and monitor diseases such as HIV, hepatitis, cancer, heart failure and metabolic disorders, as well as assess other important indicators of general health. Abbott India Limited incorporated in 1944 is engaged in the discovery, development, manufacture, and marketing of pharmaceutical, diagnostic, nutritional, and hospital products in India. The company was formerly known as Knoll Pharmaceuticals Limited and changed its name to Abbott India Limited in July 2002. This acquisition speeds up Abbott's emerging markets growth following the recent acquisition of Solvay Pharmaceuticals of Belgium at $6.2 bn and announcement of Abbott's collaboration with Zydus Cadila to sell 24 products in 15 merging markets.

Piramal Healthcare (Knowledge action care)

Introduction
Piramal Healthcare, is India's second largest Pharmaceutical Healthcare company with a presence in the cardio-vascular segment, the antibiotics and respiratory segments, pain management, neuro-psychiatry and anti-diabetics segments and biotechnology. It is based in Mumbai. Nicholas Piramal India Ltd. is now known as Piramal Healthcare Ltd. Dubbed as the second largest deal in Indian pharmaceuticals market, Abbott Laboratories has acquired the chemical solution business from Piramal Healthcare Ltd for around $3.2 billion. The reason behind the venture being India, the fastest developing country in pharmaceuticals. NPIL's brands in the pharma business are Phensedyl, Ismo, Supradyn, Gardenal, Stemetil, Haemaccel and Rejoint - these bring in 67% of the business, while its secondary brands which include Paraxin, Flagyl and Omnatax contribute around 24% of its revenues. NPIL came into existence in 1988 when it acquired Nicholas Laboratories from Sara Lee and in the last 15 years grown primarily on acquisitions, mergers and alliances. Some of NPIL's acquisitions include the Indian operations of Roche Products Ltd., Boehringer Mannheim India Ltd., Hoechst Marrion Roussel Ltd,'s Research Centre, Rhone Poulenc India Ltd., ICI India Ltd.'s Pharma Division and Aventis' Research facilities. NPIL has joint ventures and alliances with F. Hoffmann-La Roche Ltd., Switzerland; Allergan Inc., USA; UK; Gilead Sciences, USA; Cheissi, Italy; and IVAX Corp; UK. NPIL's has a 2,700-strong field force. NPIL, together with its JVs, has 16 strong brands in the Indian Pharma Industry; manufacturing plants - NPIL has plants in Hyderabad and Pithampur. With the acquisition of Pfizer's Morpeth manufacturing site in the UK, Nicholas Piramal through its wholly owned subsidiary NPIL Pharmaceuticals Limited is a custom manufacturing organization.

NPIL plans to take advantage of the opportunities that will emerge in the bulk actives and intermediates market for contract manufacturing at attractive price points of both on patent and off patent drugs for the regulated markets of Europe, US and Japan. NPIL major investments in R&D which focus on formulations development, new chemical entity research, clinical research from laboratories in India and abroad. The results till now however have not been very encouraging. Nicholas Piramal India Ltd has announced with reference to the earlier announcement dated January 22, 2008 regarding fixing of the Record Date for the purpose of determining entitlement of the shareholders of the Company to receive equity shares of "NPIL Research and Development Ltd" (NPIL) in the ratio of 1:10 pursuant to the Scheme, that the name of "NPIL Research and Development Ltd" has been changed to "Piramal Life Sciences Ltd". A certified true copy of Fresh Certificate of Incorporation Consequent upon change of Name issued by the Ministry of Corporate Affairs. NPIL is the flagship company of the Rs. 25,000 million (US $ 500 million) Piramal Enterprises (PEL). The Group is headed by Ajay Piramal, who is also the Chairman of NPIL. Piramal Healthcare is planning to foray into phytopharma through launch of herbal products in the next financial year and has plans to acquire more drug brands and diagnostics chains to expand its footprint across India. It It recently bought i-Pill brand from Cipla for Rs 95 cr in an all cash deal. France's Sanofi Aventis had announced its intention to enter the Indian market and along with it, USs Pfizer Inc & UKs GlaxoSmithKline Plc were all in the race to acquire Mumbai based healthcare company. The possible target was Piramal Healthcare.

Brief snapshot of the deal

Parties Involved in the Transaction

1. Abbott Laboratories, USA (Abbott Lab)
A corporation incorporated on March 6, 1900 under the laws of the State of Illinois, USA, with shares listed on New York Stock Exchange, Chicago Stock Exchange, London Stock Exchange and the Swiss Stock Exchange. Abbott Lab is currently into discovery, development, manufacture and sale of a broad line of health care products.

2. Abbott Healthcare Private Limited (AHPL)

A private limited company, incorporated under the Companies Act, 1956 (Companies Act) on January 1, 1997. AHPL is a wholly owned direct subsidiary of Abbott Lab and is into manufacture and sale of allopathic pharmaceutical preparations; sale of chemicals, scientific, medical & surgical instruments / equipment / devices, and nutritional products.

3. Piramal Healthcare Limited (Piramal Healthcare)

Piramal Healthcare a public company, incorporated under the Companies Act and is currently listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). The promoter holding in Piramal Healthcare is currently around 52.10%.

4. Piramal Enterprises Limited (Piramal Enterprises)

Piramal Enterprises Limited is an affiliate of Piramal Healthcare. It is a Mumbai based company, engaged in textiles, health care, glass containers, and engineering businesses.

Structure of the transaction

Overview of the deal

The transaction for sale of the Formulation Business has been structured as a slump sale / Business Transfer under Section 293(1)(a) of the Companies Act pursuant to a Business Transfer Agreement (BTA) dated May 21, 2010 entered into between Piramal Healthcare and AHPL. Under the current deal, the Formulations Business, which is engaged in research, development, formulation, manufacture, sale, marketing, distribution, import and export of generic pharmaceutical products in finished form, shall be transferred to AHPL as a going concern. The said Business Transfer will involve the transfer of all the assets and liabilities of the Formulation Business excluding cash and cash equivalents and any liability relating to indebtedness of the Company, taxes, employee and other claims, environmental matters and any actual or potential litigation. The Business Transfer is being undertaken for an all cash consideration of USD 3.72 billion (approx. INR 175 billion3). Out of the said amount USD 2.12 billion would be payable by AHPL to Piramal Healthcare on closing of the sale and a further USD 400 million is payable upon each of the subsequent four anniversaries of the closing commencing in 2011. As per the Business Transfer Agreement, Piramal Enterprises, Piramal Healthcare and their respective affiliates are prohibited from engaging in business competing with the Formulation Business (NonCompete) either in India or in emerging markets for a period of eight years from the date of closing of the Business Transfer. Further, Piramal Enterprises, Piramal Healthcare and their respective affiliates are prohibited from owning an interest in, managing, operating, joining, controlling, lending money or rendering financial or other assistance to or participating in, as a partner, stockholder, co-venturer, consultant or otherwise, with any person that is engaged in competing business either in India or in any Emerging Market. However this restriction does not extend to investment in shares of listed companies carrying on competing business, provided that such investment does not exceed 5% of

the paid up capital and such an investment is not accompanied by acquisition of control or influence in the listed entity. Additionally, guarantee has been provided by Piramal Enterprises to Abbott Lab for performance of all the obligations of Piramal Healthcare and its affiliates in connection with the Business Transfer. In consideration of the Non-Compete and guarantee, mentioned above, Piramal Enterprises and its associates will receive from Piramal Healthcare an aggregate of INR 3500 million (approximately 75 million USD) , representing approximately 2% of the total consideration. This consideration is proposed to be paid out of the total consideration received by Piramal Healthcare and shall be paid in cash on closing of the Transaction.

Chronology of events

Why did Piramal sell?

In 2008 Ranbaxy was sold to Japans Daiichi Sankyo. Abbott has valued Piramal's formulations business at about eight times its sales, which is almost twice that of what Daiichi paid for its USD 4.6 billion purchase of a controlling stake in Ranbaxy Laboratories in June 2008. Clearly Piramal got a much better valuation. (Incidentally in 2008, because of the global financial crisis, financial asset prices had taken a nosedive.) But did Piramal sell only because the business was getting a very good price? There are some entrepreneurs who build a business to sell and move on to build another.

Ajay Piramal had inherited a defunct textile mill. He bought Nicholas Pharma in 1988 when its market capitalisation was about 6 crores. He successfully nurtured the business, seizing new opportunities as they emerged and in less than twenty two years he is selling about half of the business for over Rs 17,000 crores. That is some growth! Clearly he can create value. He has gone on record that when the money is received from Abbott Piramal Healthcare would retire debts totalling Rs 1300 crores. We hope not. Considering the companys conservative debt equity ratio it is not called for and doing so is unlikely to add value.

Ajay Piramal had three reasons:

a. 45% of the business stays with Piramal Healthcare,

b. Money thats now coming can be used to retire some Rs 1,300 crores in
debt,

c. It will also provide funds for expanding the existing businesses and for
undertaking new businesses

The second point is not a reason. There is no urgency imminent need to retire debts as explained in the box. But thereis no doubt that if Piramal had to sell it is perhaps the best time to sell. The business has clocked over 24% annual growth for two years; with growing income the healthcare expenditure Of Indians is set to rise; and Indian pharma market is attracting the global players like never before. But selling only to realize top value does not gel with the entrepreneurial spirit of Ajay Piramal. Piramal seems happy to keep the remaining business and get funds to expand it. It suggests that some changes in the corporate priorities (strategies for growth) have been brewing in the Group.

Even technology, the great motivator in M&A arena seems, to have no role. Piramal has sold branded generics, where technology does not appear to be an issue. On the other hand, some of its retained businesses are technology driven.

It seems same drug manufactured by two companies having the same molecular structure may not have the same effect even when administered in same molar doses. (Molar doses imply dose adjusted to the body.

The reasons for Piramals selling can be summarized as under:

1. With the entry of Big Pharma in Indian generics the margins will suffer and competing with them will require considerably more resources. Thus continuing with generics may imply committing resources where the returns are likely to get lower.

2. Bioequivalence is hanging like a Damocles sword on generics business; if and when bioequivalence appears in the India regulatory regime, generic manufacturers may have to commit much more resources in developing or buying appropriate technologies.

3. The remaining businesses of Piramal have lots of potential. Globally the governments (and the insurance companies) are very keen on bringing down healthcare costs. This will put pressure on manufacturers to reduce cost of drug and pharma manufacturing will shift from developed world to a country like India. Piramal is already present in custom manufacturing space with Rs 1000 Crore turnover and will have a significant advantage in this business running it out of India (and from its global sites.)

4. Competing with Big Pharma in international generics markets require a lot more resources than what Piramal can raise or commit.

Why did Abbott Buy?

Abbott is 122 years old and has been present in India for 100 years. It has some very popular brands such as the antacid Digene and painkiller Brufen. The sales turnover of Abbott India Ltd (listed on NSE) is however only around 8 crores a year.

Abbott comes eighth in the global pharmaceutical rankings with 2009 revenues of $30.77 billion, which is about half of industry leader Johnson & Johnson's revenues of $61.9 billion for the same year. It wants to catch-up with its bigger rivals. This acquisition may be one of the ways to differentiate itself (from its bigger rivals) by gaining a strong toehold in an up and coming market like India. Buying a running operation is, many ways, more efficient than starting a new operation, particularly in pharma:

1. A drug company has to take approval from the regulatory authorities before it can start selling its products. It is a time consuming process.

2. Retailers have a large number of generic labels and they are wary of adding more.

3. Brand awareness needs to be created among doctors and public. This takes time and costs money.

4. An acquisition comes with sales and distribution mechanism already in place. A new company will have to recruit and train field staff, set up warehouses and establish the distribution channel.

Abbott had purchased pharma business of Belgian chemical giant Solvay for about USD 6.4 billion in September 2009. That acquisition too was in the direction of strengthening its presence in emerging markets in Asia and Eastern Europe. Solvay was present in India through its subsidiary Solvay Pharma India Ltd (SPIL, listed on BSE). The product portfolio of SPIL, broadly spans womens health, psychiatry, ENT, neurology, gastroenterology, and vaccines. SPILs sales in the year ended Dec 2009 stood at Rs 248 crores, previous year 213 crores, annual growth over 16 percent

Piramals Healthcare Business had recorded sales of Rs 2000 crores for the year ended March 2010. Piramal's products cover dermatology, anti-infectives and nutritionals, while Abbott India is focused on gastroenterology, pain, neurosciences and metabolic disorders, among other categories. The acquisition increases Abbotts product portfolio sharply. Increasing portfolio can make sense only if Abbott wants to expand in India; and why should it not? Abbott expects emerging markets will in the next few years account for 70% of the growth in the global pharmaceutical industry, and India is "an important and critical part". Abbotts expects its Indian revenue to grow to USD2.5 billion in the next decade, up from the current revenues of about USD500 million (Abbotts revenue combined with the acquisitions). If we take the next decade to mean some 9 years, this projection

envisages a little less than 20% compounded growth. (Since pharma business in emerging markets is expected to grow at 17%. Abbott foresees an increase in its market share as well.)

.Abbot may find it difficult to win market shares from its peers in developed markets. Big pharma companies in developed markets are facing two challenges: slow growth and matured products that are difficult to replace with new blockbuster drugs. The earlier wave of M&A in pharma sector internationally had been aimed at acquiring super brands. That has now dried up growth is expected from geographical diversification and that is going to be the theme song of the new wave of global pharma M&A. Abbotts only chance of improving its rank in the pecking order is, it seems, by beating its peers in gaining a formidable presence in emerging markets. Abbotts motivations, thus, can be summarized in one sentence: to ensure first mover advantage in emerging markets, among the Big Pharma. It can, of course, use the Indian manufacturing facilities it is acquiring for producing generics for developed economies but that does not seem to be an immediate objective.

According to the Market Prospects

Shares of Piramal Healthcare and Abott India reacted sharply. Abbott will make an upfront payment of $2.12 billion and annual payments of $400 million per year for next 4 years. With this acquisition, Abbott says, it will become the largest pharmaceuticals company in India. Abbott is expecting transaction to get over by H2 of 2010. The US healthcare company said the combined sales force would be the largest in the industry in India, and forecast sales of more than $2.5 billion by 2020. Piramal Healthcares's formulation business will now be part of the Abbott's newly created, stand-alone Established Products Division. Abbott plans to fund the deal with cash on its balance sheet.

At 11:34 am, shares of Abbott India surged 8.85 per cent. It hit a high of Rs 1218 and low of Rs 1010. Shares of Piramal Healthcare were at Rs 535.65, down 6.04 per cent. It touched a high of Rs 599.90 and low of Rs 535.25. Piramal Healthcare has been buzzing for the past few days on buzz of a possible takeover. In the past 7-days the stock surged over 10 per cent. The transaction will not impact Abbott's earnings outlook for 2010, the company said. Media reports had said French drugmaker Sanofi-Aventis and Pfizer Inc were in negotiations to acquire the Mumbai-based company. Abbott is looking for an asset of our liking in India and realised that most of the assets we considered were lacking the standards and yardsticks in its mind. These included product offering, quality of manufacturing and other systems and values. Once the Piramal family were willing to sell, we realised it was an opportunity and the most suitable cultural fit we could get in India. India will be a key market for us, like other competitors. India is the worlds secondfastest growing pharmaceutical market, with an $8 billion size, and this is expected to more than double by 2015. By 2020Abbott expects its pharmaceutical sales in India to exceed $2.5 billion. The market is growing at 15-16 per cent and we will grow at over 20 per cent. Piramals healthcare solutions business had sales of $440 million this year and is expected to grow to $500 million next year. This business will launch 30 new products in the Indian market this year and has lined up 38 products for launch next year. Now we have 10,000 employees in India, including about 7,500 medical representatives. We will continue to grow the business in India. These are the price fluctuations of Abbott India and Piramal Healthcare In The Bombay Stock Exchange on the announcement .

The Indian pharmaceutical sector closed 2010 on a high note, what with an impressive stock market performance, driven largely by earnings growth and bettering prospects. And if the sector undercurrents are to be relied upon, good times are likely to continue this year as well. Strong demand growth in the US market, increasing generic penetration worldwide besides a robust domestic market, promise to keep the Indian drug makers in good health in 2011 too.

Price movements of piramal healthcare after selling its stakes :

This is the graph from May 2010 to 3rd June 2011. The stakes of piramal has not given quite good returns after selling its stakes. Piramal script gives a negative of around 40% returns after its deal. The company has also given a final dividened 270% in the mid-year of 2010.

On 3rd June 2011 the script closed at positive 272.00 with 1.50 up at around .40% This is the negative aspect of the company. After selling its stakes the company has given a downword trend , and a bearish market situation.

Price Movement of Abbott India Ltd After the Deal:

This is The Price Movement Of Abbott India From May 2010 To 3rd

june 2011

Abbott India has given quite a positive returns. This Scripts currently gives a whopping 52% returns after the deal. Abbott India has also given a dividened 170% recently in April 2011. The Script looks interestingly well. It also shows a bearish Market

of

Future of Piramal Healthcare

How the deal is beneficial to them? The Formulation Business has been valued by Abbott at about 9.4 times the sales of healthcare solutions for FY 2010 and a total consideration of around USD 3.72 billion (approx. INR 17,500) is proposed to be paid to Piramal Healthcare. The paid up and listed shares are currently around 209 million Accordingly, the per share earnings for the transaction is almost in excess of INR 830, which .is at a premium of around INR 345 over the current market price of INR 488 per share Though there have been some concerns raised by few sections of investors over the fact that no monies have been paid directly to the shareholders in the proposed deal, the high premium commanded by Piramal Healthcare in this deal has been applauded in the industry circles as a great business move. The cash pool generated by the Company out of this transaction is, inter alia, expected to be utilized by Piramal Healthcare for repayment of its debts, more investment into R&D,increase the value of the remaining business and to venture into new business activities in the years to come.Post the Business Transfer of the core Formulation Business, the business which will continue to be carried out by Piramal Healthcare would include custom manufacturing (both API & Formulations) for third parties, critical care (including

inhalation anesthetics), over-the-counter consumer products, manufacture and supply of active pharmaceutical ingredients, vitamin and fine chemicals, diagnostic medical devices / equipment and diagnostic services, including pathology laboratories and radiology centers and clinical research services. In addition, Piramal Healthcare will continue to pursue novel drug discovery and research through its affiliate company, Piramal Life Sciences Limited. It is expected that the critical care business, in which Piramal Healthcare is already at No. 3 in global anesthetics market, and contract manufacturing business would be the next big growth drivers for the Company in the times to com

EPILOGUE
This deal, commanding one of the most expensive valuations in the recent times in India, has once again put the Indian pharmaceutical sector on global limelight. The entry into Indian market has its inherent economic and business advantages for foreign acquirers including geographic expansion and access to lucrative emerging markets. Ranked 4th in the world pertaining to volume of sales 30, the lucrative Pharmaceutical Industry in India has clearly captured the fascination of global MNCs. With each concluded deal, the quest for space in this rapidly growing Indian pharmaceutical market is further gaining momentum and it is expected to see many more pharmaceutical deals in India in the days to come

BIBLIOGRAPHY

 http://www.abbott.com/global/url/content/en_US/10:10/general_content/Genera l_Content_00004.htm (Scribd.com)  http://www.scribd.com/doc/39422468/Introduction-to-M-A-With-PiramalAbbott-Deal  http://www.scribd.com/doc/40551667/14611-Abbott-Piramal-Deal  http://economictimes.indiatimes.com/videoshow/5957293.cms (The Economic Times article)  http://fn.geodesic.com/big/issues/BI-Current.pdf  http://www.nishithdesai.com/M&A-Lab/M&A%20Lab%20Piramal%20Abbott%20Deal.pdf

By:
Members
Ankita Redekar

Roll No.

19 28 37

Ashwini Prabhu

Viral Shah

Ruchi Chatwani

56

Conclusion
This deal, commanding one of the most expensive valuations in the recent times in India, has once again put the Indian pharmaceutical sector on global limelight. The entry into Indian market has its inherent economic and business advantages for foreign acquirers including geographic expansion and access to lucrative emerging markets. Ranked 4thin the world pertaining to volume of sales 30 , the lucrative Pharmaceutical Industry in India has clearly captured the fascination of global MNCs. With each concluded deal, the quest for space in this rapidly growing Indian pharmaceutical market is further gaining momentum and it is expected to see many more pharmaceutical deals in India in the days to come. Within the Indian scenario, one likely impact is that the door will open up for more such deals in the future. As more innovative players evolve this hybrid(genericpatented) business model, we believe the competition will intensify further, states a report from Emkay, an equity research firm. While many promoters may be reluctant to cash out completely, alliances could be an alternative arrangement in the medium term. In our view, given the competitive intensity in the industry, being vertically integrated provides an edge