The EconomistAugust 3rd 2019 Business 55“I
havefailed” and“Igaveup”were
thesixmostwrenchingwordsina
letterbelievedtobewrittenbyV.G.Sidd-
hartha,anIndianentrepreneurwhose
bodywasfishedoutoftheNetravati
RiveronJuly31st.Thesignedsuicide
notewasreleasedbyhiscompany,Coffee
DayEnterprises.It describedunrelenting
pressurefrominvestorsandcreditors,as
wellasharassmentfromtaxauthorities.
CaféCoffeeDay,thechainMrSidd-
harthafoundedin1996,has1,700outlets
inIndia—tentimesthenumberofStar-
bucksshopsinthecountry.Theyserveas
a secondhometomanythankstorea-
sonablepricesandcomfortable,if worn,
seats.TheirubiquitymadeMrSidd-
harthaoneofIndia’smostrecognisable
bosses.Hewaslikedandrespectedin
businesscircles,havingamasseda for-
tuneofhundredsofmillionsofdollars.
Earlierthisyearhescoreda coupby
offloadinga long-termholdinginMind-
tree,a technologycompany,toLarsen&
Toubro,a conglomerate.Mindtree’s
foundersfeltbetrayedbyhiswillingnesstosellouttoanunwantedbuyer.In
hindsight,it appearshehadlittlechoice.
CoffeeDaysatatopa pileofdebt,
muchofwhichMrSiddharthapersonally
guaranteed.Sixmonthsagohetookouta
loanfroma friend,tohelprepaylenders.
“Icouldnottakeanymorepressurefrom
oneoftheprivate-equitypartnersforc-
ingmetobuybackshares,”hewrote,
withoutnamingthepartner. Aspressure
toreturnmoneytoinvestorsandcredi-
torsmounted,actionsbytaxauthorities,
whichtheletterdescribesas“unfair”,
barredhimfromsellingsharesinMind-
treeandCoffeeDay.
Ina carefullywordedstatement
respondingtoMrSiddhartha’snote,kkr,
anAmericanprivate-equityfirm,saidit
hadsolda 4.25%stakeinthecompany
(outofa holdingof10.3%)onthestock
exchangelastyearandwas“deeplysad-
denedbythedevelopments”,addingthat
“Wehavenotsoldanysharesbeforeor
afterFebruary2018.”Threeotherforeign
vehiclesheldstakesinthefirm.
TaxauthoritiesforthestateofKarna-
takaacknowledgedtheyhadblockedMr
Siddhartha’sshares.Theysaidthiswasin
ordertocoverpotentialtaxliabilities
stemmingfroma concealedtransaction
whichMrSiddharthawasinvolvedin
andwhichwasunearthedduringan
investigationintoa prominentKarnata-
kapoliticalleader.Thishasledtospecu-
lationaboutwhethertiesofMrSidd-
hartha’sfamilytopoliticiansmayhave
playeda roleinhisdeath.CoffeeDay
announcedthatit wouldlaunchitsown
investigation.
Theimpactofthetycoon’sdeathwill
linger—andnotonlybecauseofitsmys-
teriouscircumstancesandhishigh
profile.Thefactorsthatapparently
pushedhimovertheedge—dodgypoliti-
calties,taxinvestigations,highdebts—
arealltoocommoninIndianbusiness.
Whathappenedwastragic.Perhapsit
shouldnothavebeena surprise.Deathofanentrepreneur
TragedyinIndiaIncMUMBAI
Thefounderofa belovedcoffeechaincommitssuicideMrSiddharthainhappiertimesG
reater thanthe sum of its parts. That,
in a nutshell, is how Albert Bourla, the
newish chief executive of Pfizer, described
the merger of the giant drugmaker’s stodgy
but profitable off-patent division, Upjohn,
and Mylan, a big but struggling generic-
drug firm. The all-stock transaction, an-
nounced on July 29th, would create the
world’s largest generics firm by revenue,
with an enterprise value of $50bn.
All bosses promise that spin-offs they
mastermind create value for shareholders.
And there are reasons to take Mr Bourla se-
riously, says David Risinger of Morgan
Stanley, an investment bank. If the man-
agement is to be believed, the as-yet-un-
named company will have revenues of
$19bn-20bn and gross operating margins of
40%. It has pledged to pay a dividend equal
to roughly a quarter of free cashflow. The
incoming boss, Michael Goettler, who runs
Upjohn, plans to chip away at the com-
bined company’s $25bn in debt, by cutting
$1bn in annual costs by 2023.
It should be able to expand quickly out-
side America’s fiercely competitive gener-
ics market, where consolidation among
wholesalers has allowed buyers to demand
lower prices and faster regulatory approval
of generic drugs has flooded the market
with low-cost medicines. The shares of big
generics firms exposed to America have
performed miserably in recent years. The
market share of the ten biggest declined
from 53% to 44% between 2014 and 2018.
On the surface, the transaction also
makes sense for Pfizer. The drugmaker has
been shedding assets to refocus on high-
growth areas. In December it spun off its
consumer-health division, which was
combined with that of gsk, a British rival. It
previously got rid of its animal-health
business. By sticking to lucrative areas like
cancer treatments, Mr Bourla hopes to per-
suade investors that Pfizer shares deserve a
higher price.
So far Wall Street seems unconvinced.
Tim van Biesen of Bain, a consultancy,
points out that it is unclear if Pfizer can
come up with enough blockbusters to sus-
tainably offset earnings from the divest-
ment of peripheral but profitable business-
es like Upjohn. Standard & Poor’s, a
credit-rating agency, downgraded Pfizer’s
debt on the news. Pfizer’s share price fell by
6.4% on June 30th, the biggest one-day
slide in a decade. Mylan’s long-suffering
stock edged up only slightly.The merged company, for its part, in-
herits lawsuits about Mylan’s alleged price
fixing and its role in America’s opioid cri-
sis. Mylan denies all wrongdoing. Mylan’s
shareholders are still fuming over the
firm’s move in 2015 to the Netherlands,
where it adopted an opaque corporate
structure, and practices like offering to pay
Robert Coury, its chairman, about $1m a
year for not using a company plane.
Observers worry that Mr Goettler maybe in over his head. They fear the firm will
in fact be controlled by the controversial
Mr Coury, who is to be its executive chair-
man, and Rajiv Malik, his long-serving
lieutenant, who is embroiled in the price-
fixing complaints. Pressed by analysts this
week on corporate governance, Mr Coury
was evasive. He vowed to return capital to
shareholders “from day one”. “I don’t make
shit up. You know that,” he promised. In-
vestors may need more reassurance. 7NEW YORK
Pfizer’s ill-received plan to create an
off-patent-drug giantPharmaceuticalsGeneric script