Monday, April 7, 2014

India/Japan: Sun Pharmaceutical Buys Troubled Ranbaxy Labs

According to The Associated Press, India's Sun Pharmaceutical Industries is buying troubled generic drugmaker Ranbaxy Laboratories in a $4 billion all-stock transaction, both companies reported on Monday (April 7). 

The combined company will be India's biggest pharmaceutical firm, with annual revenue estimated at $4.2 billion.

Shares of Sun Pharma rose 1.7%. Ranbaxy's shares were down 4.8% in trading on the Bombay Stock Exchange.

Ranbaxy is the leading drugmaker in India's $26 billion generic pharmaceutical industry, but it has faced penalties from US regulators for years. 

The US has banned imports of drugs from two of its factories because of concerns about quality control.

COMMENT: The acquisition will allow Sun Pharma to tap into Ranbaxy's strong global presence and manufacturing capabilities. 

The combined company will have 47 factories across five continents and operations in 65 countries, said Dilip Shanghvi, Sun Pharma's managing director.

The companies reported that Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share of Ranbaxy with an implied value of 457 rupees, a premium of 18% to Ranbaxy's average share price over 30 days. 

Ranbaxy shareholders are expected to own 14% of the new company and Ranbaxy's parent company, Japan's Daiichi Sankyo, will be the largest single shareholder.

Ranbaxy has annual revenue of about $2 billion.

The acquisition is subject to approval of shareholders of both Sun Pharma and Ranbaxy.