IF there is one similarity between wildlife photography and corporate
M&A, it is timing. A few seconds can make a world of difference between
deep frustration and sheer delight and nobody knows this better
than Ajay G Piramal, a committed wildlife photographer and ace
deal maker. Quite a few times in a business career spanning nearly
three decades, Mr Piramal has had to take decisions affecting thousands
of shareholders, employees and involving money worth hundreds
of crores in a matter of hours, if not seconds.
When French drug maker Roche was looking for a buyer following
a controversy and the sudden departure of its India head in the early
1990s, Mr Piramal was there, willing to iron out the wrinkles, pay the
money and take on the risks. When Boehringer Mannheim, the German
drug major, wished to exit after a controversy in the quality of
drugs, Mr Piramal was once again at hand, ready to do the deal.
So, it should have been no surprise to investors that when Abbott
Labs, the sleepy US giant, whose market cap in India is still less than
that of a Biocon despite being present in India for many more years,
wanted to expand through acquisition, Mr Piramal was the man they
sought. Only this time, he was on the other side as the seller.
At a net present value of $3.2 billion, Abbott’s purchase of Piramal
Healthcare’s branded generics unit is smaller than Daiichi Sankyo’s
purchase of Ranbaxy which was at over $4.6 billion. But in terms of
valuation, Abbott’s deal is far bigger and ambitious. It values Piramal’s
branded generics business at nine times its 2010 sales compared with
Ranbaxy’s four times. Based on 2010 earnings before interest, tax and
depreciation, (EBITDA), the price paid by Abbott is nearly 30 times.
Daiichi’s deal was done at about 22 times. The numbers are even
more impressive considering that Abbot bought just one unit while
Ranbaxy sold the entire company.
“It is a great deal. Piramal has bought cheap and sold for a fantastic
price,” said Jacob Mathew, managing director, MAPE Advisory
Group, a boutique investment banking firm.
Quite a lot of the credit for this should go to Mr Piramal alone.
Much before anybody else, he saw value in branded generics, building
a portfolio of brands that would compete strongly in the local market.
But unlike other Indian pharma industrialists such as Parvinder
Singh, Dr Anji Reddy, he never saw much value in generic exports,
taking on the multinationals on their home turf. He is known to tell
his close advisors that there was no money to be made there and he
didn’t want to take on multinationals at their own game.
His first opportunity though came at a time of deep crisis. The Datta
Samant-led strike had wrecked Mumbai’s textile industry and
Morarjee Gokuldas, Piramal’s textile firm, had suffered like others. He
was in his early 30s and had just taken over as the chairman of the
group following the death of his father and brother. The landscape
looked bleak. The prospect of spending decades running a textile
business did not appeal to him.
This was when he heard from a friend that Nicholas Laboratories, an
Australian MNC, was exiting India. Though many large suitors were in
the race, Piramal, then 33, convinced Mike Barker, the person in
charge of the sale, to sell to him. His next opportunity came with Roche
and then Boehringer Mannheim, two multinationals which were in
trouble and looking to sell. Piramal did the deals overnight.
“Immediately after the buyout in 1988, he made a presentation to
the board saying that he would make Nicholas Piramal among the top
three companies in India by 2000. Board members were sceptical at
that time, but he achieved his target,” says Mahesh Gupta, MD,
Ashok Piramal group who had helped Ajay Piramal clinch many early
deals as group CFO.
He never paid a lot of money for his purchases. A shrewd Mumbaiker,
he knew the value of real estate that many of his targets owned.
While his first priority was to build the pharma portfolio, he never lost
sight of the non-pharma opportunities that his deals can engender. One
of the biggest acquisitions was the Rs 157 crore that he paid Hoechst
when he bought Rhone Poulenc. He almost recovered the entire investment
by selling property belonging to Rhone in central Mumbai.
At the press conference in Mumbai on Friday, Mr Piramal almost became
emotional when he talked about the value created in the pharma
business. “When we entered the domestic pharma business 22 years
ago, people were exiting from it. We created a future in it and time has
come to look for newer opportunities.” Normally shy and reclusive, he
is not known to talk about his achievements. But considering what he
has done, it would be difficult to grudge him a bit of chest-thumping.
M Sabarinath
No comments:
Post a Comment