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Court awards $525 million to Daiichi Sankyo for Ranbaxy deal gone wrong

Singapore arbitrator sides with Japanese drugmakers’s claims it was misled

by Jean-François Tremblay
May 12, 2016 | APPEARED IN VOLUME 94, ISSUE 20

An arbitration court in Singapore has ordered former shareholders of India’s Ranbaxy Laboratories to pay $525 million to Daiichi Sankyo. The Japanese company claimed that when it acquired Ranbaxy in 2008, the large shareholders with whom it negotiated had concealed the severity of regulatory issues that Ranbaxy was facing with the U.S. FDA.

The award was leveled against New Delhi’s RHC Holding, an investment firm led by Malvinder Mohan Singh, the former CEO of Ranbaxy who had negotiated the sale to Daiichi Sankyo on behalf of his family.

In a statement, RHC Holding said it would explore “further legal options to challenge the majority award.” The RHC Holding statement noted that one judge in the Singapore court, a former chief justice in India, had issued a dissenting opinion dismissing all claims.

Daiichi took over Ranbaxy for $4.6 billion in June 2008 after agreeing to pay a premium for the 31% stake held by the Singh family and making a similar offer to other shareholders to acquire a majority interest. But only six months later, in early 2009, Daiichi wrote off most of Ranbaxy from its books, a $3.9 billion hit, after FDA banned several Ranbaxy drugs from the U.S. owing to manufacturing deficiencies discovered at several plants in India.

Ranbaxy eventually paid the U.S. a record fine of $500 million for fraud committed at its facilities. In April 2014, Daiichi Sankyo gave up on its Indian unit, agreeing to sell Ranbaxy to India’s Sun Pharmaceutical Industries for $4 billion.

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