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A recent interpretation of the takeover code threatens to rewrite the rules for M&A and add millions of dollars to the cost of Daiichi’s acquisition of Ranbaxy

The Daiichi-Ranbaxy deal is a classic lesson in how apparently minor details can develop into complex and protracted liabilities, sucking up resources and damaging reputations.

When Japanese pharmaceutical company Daiichi Sankyo took over Ranbaxy Laboratories for US$4.6 billion in June 2008 (see India Business Law Journal, July/August 2008), few could have imagined that just 18 months later the matter would be before the Supreme Court – a result of Daiichi’s indirect acquisition of Ranbaxy’s subsidiary Zenotech Laboratories.

The point of contention is an extra US$12.6 million that Daiichi might have to pay to acquire 20% of the public shareholding in Zenotech. The case hinges on the interpretation of the term “persons acting in concert” and the determination of the relevant date from which open offer prices are calculated.

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