The brothers, who inherited the business when father Parvinder Singh died of cancer in July 1999, will sell their 34.82 per cent to the Japanese generics giant for $2.23 billion, over Rs 9,500 crore.

Daiichi Sankyo, which is Japan's third largest drugmaker, will be stumping up the rest of the money to raise its holding above 50.1 per cent, which will give it a controlling interest in a pharmaceutical giant that will rank 15 in the global pecking order.

The deal has been struck at a price of Rs 737 a share, 31 per cent above Tuesday's closing price on the stock markets.

Malvinder Singh (35) will stay on as chief executive officer and managing director in Ranbaxy which will retain its name and become a subsidiary of Daiichi. He will also become the chairman of Ranbaxy's board of directors.

"This is not a sell-out. This is a strategic deal to position the company and transform us to the next level. This (Ranbaxy) is my passion… I love this business," Malvinder Singh said.

The deal is subject to regulatory approvals and the transaction is expected to be completed by March 2009.

The Japanese company, which is best known for its Benicar hypertension drug, has been looking to buy into a large generics maker and Ranbaxy fits that bill.

Daiichi will come up with an open offer for another 20 per cent of Ranbaxy shares which is mandatory under Indian regulations. Most market observers expect an overwhelming response from the minority shareholders to this offer.

The deal provides for the preferential allotment of shares or warrants to the Japanese company to attain the minimum stake of 50.1 per cent.

The buyout is the second biggest in Indian corporate history after Vodafone paid $11 billion for Hong Kong-based Hutchison Whampoa's stake in Hutchison Essar, the mobile telephony player.

The Singh brothers were also playing true to family traditions, mimicking uncle Analjit Singh's staggered sell-off of his holding in Max Telecom, the original founder of the entity that is today under Vodafone's control.

The deal brokered by Ranbaxy's financial arm was kept a tightly held secret for over a month during which the negotiations were being made.

For Daiichi, the deal represents a foray into the high-growth area of generic drugs and is the latest in a string of large overseas acquisitions by Japanese companies.

The Ranbaxy stock closed at Rs 560.80 on the Bombay Stock Exchange after leaping over 5 per cent at one stage.

Singh said: "The net worth of Ranbaxy will rise to Rs 10,000 crore from Rs 2,800 crore. After the deal is wrapped up, Ranbaxy will become a debt-free company. About $440 million of foreign currency convertible bonds will be converted into equity at around Rs 550 per share. The new capital infusion will be used to clear the debt."

The deal will be financed through a mix of debt facilities and existing cash resources of Daiichi Sankyo, bankers said.

Takashi Shoda, the president and CEO, Daiichi Sankyo, said the transaction was in line with its goal to become a global pharmaceutical innovator. "The Ranbaxy deal gives us access to 60 countries, including emerging markets."

India's pharmaceutical market is projected to expand by more than 12 per cent a year. In contrast, the Japanese market will grow 1 per cent to 2 per cent this year.

Courtesy: The Telegraph