Book Excerpt: Daiichi Wasn’t Amused When Shanghvi Broached Ranbaxy Buyout

Amid the Ranbaxy brand mayhem, one person was quietly reviving his old contacts and lunching with his Ranbaxian friends at a Mumbai hotel asking them, ‘Should I buy Ranbaxy?’ This person was Dilip Shanghvi. ‘Yes, you should,’ his friend claimed to have replied. ‘Why?’ ‘It’s a no-brainer. It’s an ideal catch, the two firms make for a perfect jigsaw fit. Sun derives 90 percent of its sales from U.S. and India; Ranbaxy only 40 percent from these two countries. Which means Sun creates its footprint across the rest of the world. You know the math and geography. In India, Sun is strong in the south, west and the east and Ranbaxy in the north. Sun has the lowest cost of manufacturing today, probably the best sales to cost ratio, Ranbaxy’s cost control has gone totally haywire.’ ‘How should I go about it?’ ‘Daiichi trusts only a few top Japanese banks. You should try dealing with them either through Nomura or Mizhuo bank,’ his friend claimed to have advised him. But none of these friends would be the first to know what was happening.

At Sun, when Shanghvi uncorked a conversation about Ranbaxy with Makov, prefixing it with ‘maybe, we could consider buying . . .’, the chairman jumped. He latched on to it the very second Shanghvi brought it up. ‘I didn’t even take a minute. I said, “Fantastic, Dilip, marvellous deal, unique opportunity, let’s go for it,”’ Makov recalled. In his Teva days, he had seen the glory of Ranbaxy—the unrivalled pharma brand from India, much larger than Sun. He was also friends with DS Brar, then CEO of Ranbaxy. ‘At Teva, we cooperated and competed with Indian companies simultaneously. We partnered to build APIs together on one side and were punching each other on products’ market shares.

At the same time, he knew that convincing the Japanese, so insulated in their cultural island, was not going to be any easier than making a vegetarian Shanghvi gulp a sushi. Makov and Shanghvi masked their first efforts by making a Tokyo trip not to meet Daiichi alone, but a host of Japanese pharma firms, under the guise of striking friendship pacts with them. So many handshakes, bows, konnichiwas later, they finally met the Daiichi management for lunch. There were Shanghvi, Makov and their investment bankers on one side of the table, and Daiichi CEO Joji Nakayama, Ranbaxy chairman Tsutomu Une, along with people from the Daiichi management on the other.

Just as lunch was served, the Daiichi executives, oblivious of their guests’ design, got excitedly chatting about their future plans for Ranbaxy. Makov didn’t choke on that but realized how uphill the task was going to be. ‘They were so fired up and sounding so optimistic about their future strategies for Ranbaxy. It was not an encouraging signal at all. In that euphoria I couldn’t imagine how to begin telling them that we are here to sniff around,’ Makov laughed. Shanghvi smiled from time to time, mostly listening intently, pitching in with his punch-packed one-liners about the industry. And then, the moment came, when it was time to part and nothing that mattered from Sun’s side had been said or done.

The courteous Japanese, who were hosting the meal, bowed down and Makov stood up to his wave goodbye. And then, as if he had forgotten to mention something, he addressed Nakayama san and broached the subject of Ranbaxy, ‘Oh, you know, I just want to share a thought of mine . . . you have many objectives to enter generics with Ranbaxy . . . and I think if we merge with Ranbaxy . . .’

The reaction from the Japanese side was a silent cold stare. ‘Their reaction was, “Yes, yes, I will throw you out of the door.” It was crazy. This is how our first meeting ended. We knew well enough to not expect anything immediately. But we had planted the seed in Daiichi’s mind and it wasn’t easy, I can tell you, to plant that seed,’ Makov asserted.

Excerpted from The Reluctant Billionaire: How Dilip Sanghvi became the richest self-made Indian, with permission from Penguin Random House India.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.