TRANSACTION DETAILS

DEAL RATIONALE
Buyer’s Perspective

 Entry into emerging markets ,catch up with other

global players

 Emerging Market to account for 70% growth in

pharma sector . Low growth rates in developed
markets

 Strategic fit (Adds to its portfolio)

 Piramal's dermatology, anti-infectives and

nutritionals
 Abbott India gastroenterology, pain,

neurosciences and metabolic disorders

 Acquisition V/s New Operations

 Creation of Brand Awareness / Regulatory
Clearences – Time Consuming
 Sales and Distribution is in place in case of

acquisitions
DEAL RATIONALE
Seller’s Perspective
Advantages for Piramal
oBest time to sell (Good
Valuations)
oHigher Price
oFocus on other businesses
 Ajay Piramal‘s 3 stated reasons
 45% of the business stays with Piramal
Healthcare,
 Money that’s now coming can be used to
retire some Rs 1,300 crores in debt,
 Provide funds for expanding the existing
businesses and for undertaking new
businesses
 Other Reasons
 Entry of foreign players , Margins will be
lesser in the future
 Competing with them will require more
resources and lower future returns
 Regulatory Concerns (Bioequivalence)
 Pharma Manufacturing to be a major
growth driver for Piramal
DEAL STRUCTURE
 It is a sale of business, not sale of the company. Piramal hived off a particular
business and sold it to Abbott

 Piramal sold its Domestic Formulation business on a slump sale basis,( together
with all its assets except cash and current liabilities) to Abbott Healthcare for a
total of $3.7bn

 The assets to be transferred included the manufacturing facilities at Baddi,

Himachal Pradesh and rights to some 350 brands and trademarks

 Piramal agreed to a structured deal , in which they would receive $2.1 bn initially
and the rest in 4 annual installments of $400mn

 Piramal payed Rs 350 cr to the promoter group (PEL and associates) for ensuring
that all obligations under the sale agreements by Piramal and the promoters are
fulfilled
RICH VALUATION, EVEN POST TAXES
The sale consideration is Rs 17,500 cr but as only Rs. 10,000 cr will be received
in the first year , and the rest over four years, the present value is about Rs
14,000 cr

Even though the npv of the sale is 14,000 cr, Piramal had a tax liability
assuming that the selling price was Rs 17,500 cr With this selling price,taxes at
Rs 3500 crores had to be paid on closure of the deal.

Value of Healthcare business post tax Rs. 10500 cr

Diluted No. of Shares 21 cr

Per Share sale price Rs. 495

Share Price of Piramal Healthcare at the time(Entire Business) Rs. 470

Piramal received more than the market value of the complete entity for just 55% of the business
despite paying almost $ 750mn as tax