India Sun vows 'appropriate action' as merger halted

New Delhi: India's Sun Pharma said Saturday it will take "appropriate action" after a court suspended the generic giant's $3.2-billion takeover of troubled rival Ranbaxy while insider trading allegations are probed.

The Andhra Pradesh High Court order, dated April 25 but which came to light late this week, marks a setback to the deal. The ruling follows a petition submitted by two investors seeking an investigation into accusations of insider trading in Ranbaxy shares ahead of the takeover announcement earlier in the month. "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," a Sun Pharmaceutical Industries spokesman said in a statement emailed to AFP.

The court ordered that the "status quo" existing before the transaction be maintained while the movement of the Ranbaxy shares before the April 7 deal are looked at. Ranbaxy is 64-percent owned by Japanese drugmaker Daiichi Sankyo. The movement in the shares has focused attention on a Sun unit, Silverstreet Developers, which bought Ranbaxy shares before the transaction. "The matter related to purchase of shares of Ranbaxy Laboratories Ltd does not violate insider trading rules," the Sun spokesman said in the email.

Sun holds itself to the "highest standards of corporate governance and business ethics", the company spokesman added. The investors alleged in their writ petition that some investors knew about the merger ahead of its announcement and profited, breaking insider trading rules. The court has ordered stock exchange regulators not to approve the merger until questions about the share movements are answered. The Securities and Exchange Board of India announced separately earlier in the week it was looking at movements in Ranbaxy stock before the takeover announcement. Ranbaxy's shares leapt over 20 percent in heavy trading volume in the days leading up to the deal after suffering sharp losses in previous years due to long-running regulatory problems.

Last year, Ranbaxy paid a $500-million fine for falsifying drug safety records. Daiichi had struggled unsuccessfully to resolve the Indian company's US regulatory woes after acquiring Ranbaxy in a 2008 $4.6-billion acquisition. New Delhi-based Ranbaxy is unable to export drugs to its key US market from its Indian plants due to bans imposed by the US Food and Drug Administration (FDA) over quality problems.

Mumbai-based Sun had said the Ranbaxy purchase would give it a broader range of drugs in its medicine cabinet, a robust drug pipeline and a wider geographical reach. With the purchase, Sun, which has a history of nursing ailing acquisitions back to health, would become the world's fifth-largest generics pharmaceutical company and nearly double its annual sales to $4.2 billion.