Daiichi Sankyo to raise $3 billion in bonds to repay Ranbaxy’s acquisition loan

Japan's third-biggest drug maker Daiichi Sankyo Co plans to sell bonds to refinance its loan, which it took to acquire India's biggest pharmaceuticals company, Ranbaxy Laboratories for $5 billion last year. (See: Daiichi Sankyo completes Ranbaxy acquisition)

Daiichi Sankyo, which plans to sell a little over $3 billion in bonds, has hired Nomura Holdings and Daiwa Securities to manage the sale.

The Tokyo-based drug maker had borrowed approximately $2 billion in November to finance the acquisition and the company intends to sell the bonds soon so that it can repay the loan but the size of the company's first issue of non-convertible debt, has not yet been decided by the drug maker.

The registration allows sale of the bonds within two years of 6 June, according to a regulatory filing with Japan's finance ministry.

In the past two years, four Japanese pharmaceutical companies have made multi-billion acquisitions in order to diversify their product portfolio and the acquisition of Ranbaxy allowed Daiichi Sankyo to make a foray into the lower-priced generic drug market.

Last week, the drug maker revised its fiscal full-year losses downward from 335.8 billion yen to 215.59 billion yen in line with the new governments accounting guideline, which allows it to book a smaller stock valuation loss from its stake in Ranbaxy since the company has written down 351.3 billion yen as Ranbaxy's share price has constantly plunged in the last year.

''The group posted a net loss of 215.4 billion yen, compared with net income of 97.6 billion yen in the previous year as the result of recording 351.3 billion yen in extraordinary losses due to a one-time write down of goodwill pertaining to the investment in Ranbaxy,'' the company said in a statement.

Last month, Malvinder Singh, chairman, CEO and managing director of Ranbaxy Laboratories, had stepped down, ending an era in the Indian family-controlled generic drugs giant's history. (See: Malvinder Singh relinquishes charge of Ranbaxy; Daiichi takes over)

The exit of Malvinder Singh bought cheer to unsentimental investors in both Tokyo and Mumbai on the news that Singh had been politely shown the door by new owner Daiichi Sankyo. (See: Markets cheer Malvinder's exit from Ranbaxy)

Shares of both Ranbaxy and Daiichi surged on their respective exchanges late last month, Daiichi Sankyo headed for the biggest two-day gain since 2 April on the Tokyo Stock Exchange, even as the benchmark Nikkei 225 Stock Average dropped 0.9 per cent.

In Mumbai, investors in Ranbaxy Laboratories got richer by over Rs1,900 crore in a single day as the scrip surged by a little over 20 per cent on the Bombay Stock Exchange a day after the pharmaceutical major announced a change of guard at its top management level.