Hyderabad: In a major blow to the largest consolidation attempt in the Indian pharmaceutical sector, the Andhra Pradesh High Court has issued an interim stay on the merger of Ranbaxy with Sun Pharma.
“There shall be interim status quo, as prayed for,” Justice P. Naveen Rao said in his order released on Tuesday, in response to a petition filed by AP-based investors in Ranbaxy.
The petitioners had requested the High Court to grant an interim stay as they suspect insider trading in Ranbaxy shares before the merger with Sun Pharma was announced on April 6.
They requested the court to direct the Sebi to investigate the alleged insider trading and also to restrain stock exchanges from clearing to the merger of Ranbaxy with Sun Pharma.
As per the statement submitted to the court, more than 70 lakh Ranbaxy shares were traded before the merger was announced, pushing the share price by over 25 per cent.
Following its $3.2 billion acquistion deal, the Mumbai-based Sun Pharma had decided to merge struggling Ranbaxy Laboratories with itself.
The all-share transaction, the biggest pharmaceutical sector deal in the Asia-Pacific region this year, would have created the world's fifth-largest maker of generic drugs.
Typically, it will take at least eight months for two publicly-listed companies to merge in India.
According to analysts, the High Court’s interim order may delay the merger, but it may not affect the acquisition deal.
A similar situation had arisen when Tech Mahindra had acquired Satyam Computers in a government-monitored auction. However, the AP High Court had finally cleared the merger despite loan recovery cases against Satyam Computers.
Reacting to this order, Sun Pharma spokesman told this newspaper that the High Court did not hear them before issuing the order.
“We have not received any such communication. The matter related to purchase of shares of Ranbaxy does not violate insider trading rules. With regards to the petition filed, the matter is sub judice and hence we cannot make specific comments but we would be taking appropriate action as advised by our legal counsel,” the spokesman said.
