Sun Pharma acquires Ranbaxy for $3.2 billion; emerges as the fifth largest pharma company in world
Ranbaxy Company
Mumbai: Sun Pharmaceutical Industries has agreed to acquire troubled generic drug maker Ranbaxy Laboratories in a $3.2 billion all stock transaction thereby creating the world’s fifth largest specialty generic company and the largest pharmaceutical company in India. The deal comes at a time when Ranbaxy is facing intense scrutiny from the US Food and Drug Administration (FDA), which has banned it from exporting drug ingredients to the US for not following good manufacturing practices.
According to the agreement, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio represents an implied value of '457 for each Ranbaxy share, a premium of 18 per cent to Ranbaxy’s 30 day volume weighted average share price. Once the deal is concluded, Japan’s Daichi Sankyo, which now holds 63.4 per cent stake in Ranbaxy would remain a significant shareholder of Sun Pharma with a 9 per cent stake and will have the right to nominate one director to Sun Pharma’s board of directors.
“Ranbaxy has a significant presence in the Indian pharma market and in the US where it offers a broad portfolio of Abbreviated New Drug Application (ANDA) and first to file opportunities. In high growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma’s strengths. We see tremendous growth opportunities and are excited with the prospects or creating lasting value for both our shareholders through a successful combination of our franchises,” said Dilip Shanghvi, managing director, Sun Pharma.
The combined entity will have 47 manufacturing facilities across 5 continents. Additionally, the combined entity will have increased exposure to emerging economies while also bolstering Sun Pharma’s commercial and manufacturing presence in the US and India. “The combined entity would be more diversified with the US, rest of the world and India, contributing 47 per cent, 31 per cent and 22 per cent of sales respectively.
Given the growth opportunities and its market share, we believe that the stock of Sun Pharma would continue to trade at a premium to sector valuations,” said Sarabjit Kour Nangra of Angel Broking. The shares of Sun Pharma climbed 2.68 per cent on the BSE to end the day at '587.25. Sun Pharma expects to realise revenue and operating synergies of $250 million by the third year post closing of the transaction.
These synergies are expected to result primarily from topline growth, efficient procurement and supply chain efficiencies. Ranbaxy has received a subpoena from the US Attorney requesting that Ranbaxy produce certain documents relating to issues previously raised by the FDA with respect to Ranbaxy’s Toansa facility.
( Source : dc corerespondent )
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