Swap ratio at 4:1; new entity called Ranbaxy Life Science Research
“The de-merger of our NDDR Unit into a separate entity establishes a robust structure to carry out path breaking research”. – Mr Malvinder Singh
New Delhi, Feb. 19 Pharmaceutical major Ranbaxy Laboratories Ltd on Tuesday said its board has approved the hiving off of its research and development unit New Drug Discovery Research (NDDR) into a new subsidiary called Ranbaxy Life Science Research Ltd (RLSRL).
As per the de-merger scheme shareholders will get one share of the new entity for every four shares held by them at present. The company said that the spin off will result in cost savings of about $25 million in the current year.
According to market analysts the move is a two-pronged strategy. First, to provide financial resources to enhance R&D initiatives and bring in strategic investors who understand the business. And second to increase the shareholder value by improving the overall profitability by hiving off the resources consuming R&D. Telecom companies are also following a similar strategy by hiving off their tower infrastructure into new subsidiaries.
Ranbaxy said that this was a significant step in creating an independent pathway for its R&D unit with dedicated resources and an enhanced focus for long-term growth.
“Ranbaxy has modern research infrastructure and a highly skilled scientific talent pool. These strengths can be more effectively leveraged through an independent vehicle that better aligns assets with priorities to accelerate the company’s drug discovery programmes. The resulting operational freedom and flexibility will also help to open up new growth opportunities while providing a platform for increased collaboration,” the company said in a statement.
Mr Malvinder Mohan Singh, CEO and Managing Director, Ranbaxy Laboratories Ltd, said, “The de-merger of our NDDR Unit into a separate entity establishes a robust structure to carry out path breaking research at the cutting edge of modern medicine. It will also enable RLSRL to create intellectual property at a faster pace while positioning it for the future”.
Ranbaxy has subscribed to redeemable preference shares of RLSRL aggregating Rs 200 crore, to meet its business needs. Post de-merger, the equity capital of RLSRL will be Rs 12.6 crore. Ranbaxy and RLSRL Employees Welfare Fund Trust will respectively hold 19.8 per cent and 4.9 per cent of the equity share capital of RLSRL. The balance will be held by the shareholders of Ranbaxy.
It is proposed that equity shares of RLSRL will be listed on the National Stock Exchange and the Bombay Stock Exchange while GDRs will be listed at the Luxembourg Stock Exchange.
All approvals required for the scheme to come into effect, including that of the Punjab and Haryana High Court, are expected in the second half of 2008.