Malvinder Went To Seek Ally For R&D Unit, Ended Up Selling Co IT BEGAN with the Ranbaxy management looking for an investor for its R&D unit and ended up with them finding a buyer for the parent company. And ironically, while Ranbaxy has been sold, the new owners have decided to retain the R&D unit within the company. The story goes that sometime around March, Ranbaxy CEO Malvinder Singh and COO Atul Sobti met Daiichi Sankyo executives in Tokyo to explore the possibility of a partnership for the Indian pharma major's new drug discovery research (NDDR) business, which it planned to demerge into a separate company. Like other Indian pharma companies, Ranbaxy had announced its decision to hive off this unit and company executives were in talks with several companies for an alliance. But Daiichi had other ideas. It expressed its interest to buy into Ranbaxy. It was setting up a whollyowned subsidiary in the country, headed by another ex-Ranbaxy executive D Vijendran. The Japanese company planned full-fledged operations in India and had long-term plans. Ranbaxy has a strong presence in the Japanese generic market and Daiichi was aware of its strengths. As Daiichi's CEO Takashi Shoda said on Wednesday: "In India, we have only considered Ranbaxy as a prospective partner.' It is learnt that Mr Singh was lukewarm to the proposal. After he returned to India, he discussed it with his close confidants, including younger brother and Fortis Healthcare CEO Shivinder Singh and Religare CEO Sunil Godhwani (who is also called the third pillar of the Ranbaxy promoter group). Both felt Daiichi's proposal could be examined and should not be dismissed outright. Ranbaxy-Daiichi talks shrouded in secrecy AND so discussions began quietly and at the highest levels. Leading Ranbaxy in the talks were Mr Singh and Mr Godhwani. It is believed that even Mr Sobti, the second highest-ranking Ranbaxy executive after the CEO, was not kept completely in the loop. "Malvinder kept his cards close to his chest,' said a company insider. From Daiichi's side, apart from its CEO, a key figure involved in the discussions was the company's board member (global strategy) Une Tsutomu. The Japanese company was advised by Nomura Securities. Nomura had earlier advised Mitsui in India to pull out of the $700-million Sesa Goa by selling its stake to Sterlite and was also part of the consortium that helped Sterlite raise $1.2 billion ADS two years ago. As negotiations moved ahead, few senior executives had a sense about "some discussions' but believed the talks were for a strategic alliance. However, a couple of weeks before the announcement, a few key executives and select board members, including ex-Ranbaxy CFO and old Parvinder Singh-loyalist Vinay Kaul, were informed about the promoters' plan to sell their entire stake. Meanwhile, the Ranbaxy share price started rising. Whether by sheer coincidence or because of positive news flow, the company's stock shot up 28% from Rs 443 on April 1 to Rs 568 on June 9, a day before the deal was announced. The rising scrip price would have definitely strengthened the sellers' hand. Of course, Daiichi was not the only company that wanted to buy out Ranbaxy. Unconfirmed reports suggest that last year the company had rejected private equity giant Carlyle's proposal to buy it out. GSK, too, is learnt to have proposed a buyout at a higher price than Daiichi.