COLLABORATIVE STRATEGY BETWEEN INDONESIAN STATE-OWNED PHARMACEUTICAL COMPANY BETWEEN PT KIMIA FARMA Tbk AND PT INDOFARMA Tbk: THE CHOICES OF MERGER OR ACQUISITION

• Main Author: (NIM: 29111001), LANNY
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/18819
• Institution: Institut Teknologi Bandung

Until January 2012, there are 141 state-owned companies consist of 14 companies in Perum, 109 companies in Persero, and 18 companies in Persero Terbuka. In addition, the state also has a minority ownership interest in 15 entities. In fact, almost 90% from total asset, equity and sales of the entire state and almost 80% net profit the entire state only come from 22 state-owned companies. Therefore, to achieve economies of scale and the healthy control range needed a rightsizing policy. One of the strategic activities toward fulfill the rightsizing policy is combining of pharmaceutical companies between PT Kimia Farma Tbk and PT Indofarma Tbk. Rightsizing program can be done through stand-alone, merger or acquisition, holding, divestment, or liquidation. However, based on some criteria in each policy which made by Ministry of SOEs, PT Kimia Farma Tbk and PT Indofarma Tbk are more appropriate to be merged or acquisitioned.The main idea from merger and acquisition is one plus one makes three, which can be said that there is a synergy was created between the companies. In this study, valuation will be done to get synergy resulted from merging between PT Kimia Farma Tbk and PT Indofarma Tbk using Discounted Free Cash Flow (DCF) Method. There are two scenarios, which are merger scenario and acquisition scenario with PT Kimia Farma Tbk as parent company. From those scenarios, we will determine the total value of combined company.Regarding to business issue, problem identification and business solution of this study can be concluded that there is an opportunity between PT Kimia Farma Tbk and PT Indofarma Tbk to do merger. However, there is not an opportunity for PT Kimia Farma to acquire PT Indofarma Tbk with objective to gain the higher value. It is because the total payoff was resulted from merger process is higher than total payoff from acquisition process.From results in this study, some recommendations were given for merger process namely (1) management should manage the risks that might be occur from all aspects (2) management should consider about the interest rate and fluctuation of foreign exchange rate. Because both of them are very influence revenue and cost of capital. Meanwhile, revenue and cost of capital are the components that are most sensitive to changes in the value of combined company (3) this study just analyzes the merger process from the financial aspect. If this merger applicable, this study should more focus on other aspects, such as change in management after merger process, operational, human resources, IT, etc.