Sun Pharmaceuticals Industries said it will buy generic drug maker Ranbaxy Laboratories Ltd, which has hit regulatory snags in its key US market over quality issues, in an all-share deal with total equity value of $3.2 billion.
Ranbaxy Laboratories, India’s No.1 drugmaker by sales and 63.4 percent held by Daiichi Sankyo Co Ltd, is banned from exporting drug ingredients to the United States, while Sun Pharmaceutical’s Karkhadi plant is also barred from shipping products by the USFood and Drug Administration.
Sun Pharmaceutical said Ranbaxy shareholders will get 0.8 Sun Pharma shares for each Ranbaxy share. It added that the merged company will become the world’s fifth-largest specialty generics company and the largest drug firm in India.
Daiichi Sankyo said in a statement that it will hold about a 9 percent stake in Sun Pharmaceutical after the deal, which has been agreed to by the boards of both companies.
In a separate statement, Daiichi Sankyo said the USAttorney’s Office in New Jersey had issued an administrative subpoena to Ranbaxy seeking information related to the company’s Toansa plant in India. Ranbaxy is cooperating with the information request.
Shares in Daiichi Sankyo climbed as much as 4.1 percent to a 2-1/2 month high of 1,827 yen in early Monday trade, outpacing a 1.2 percent decline in the benchmark Nikkei.
Sun Pharma to buy Ranbaxy in all stock deal valued at USD3.2bn
(PTI) – Sun Pharmaceutical Industries will fully acquire troubled Ranbaxy Laboratories, in an all-stock transaction with a total equity value of USD 3.2 billion.
“Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd today announced that they have entered into definitive agreements pursuant to which Sun Pharma willacquire 100 per cent of Ranbaxy in an all-stock transaction,” the two companies said in a statement.
Under these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. The transaction has a total equity value of approximately USD 3.2 billion.
“This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18 per cent to Ranbaxy’s 30-day volume-weighted average share price and a premium of 24.3 per cent to Ranbaxy’s 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014,” it added.
The combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world and the largest pharmaceutical company in India.
The combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs.
On a pro forma basis, the combined entity’s revenues are estimated at USD 4.2 billion with EBITDA of USD 1.2 billion for the twelve month period ended December 31, 2013.
The transaction value implies a revenue multiple of 2.2 based on 12 months ended December 31, 2013.
Commenting on the development, the Sun Pharma Managing Director said, “Ranbaxy has a significant presence in the Indian pharma market and in the US where it offers a broad portfolio of ANDAs and first-to-file opportunities. In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma’s strengths.
Ranbaxy Managing Director and Chief Executive Officer Arun Sahwney said the transaction brings significant value to all Ranbaxy shareholders.
“Sun Pharma has a proven track record of creating significant long-term shareholder value and successfully integrating acquisitions into its growing portfolio of assets.
We are confident that Sun Pharma is the ideal partner to help us realise our full potential and are excited to participate in future value creation opportunities,” he added.
The proposed transaction has been unanimously approved by the Boards of Directors of Sun Pharma, Ranbaxy, and Ranbaxy’s controlling shareholder, Daiichi Sankyo.
Ranbaxy’s board and Sun Pharma’s board have recommended approval of the transaction to their respective shareholders.
The statement further said Ranbaxy has recently received a subpoena from the United States Attorney for the District of New Jersey requesting that Ranbaxy produce certain documents relating to issues previously raised by the FDA with respect to Ranbaxy’s Toansa facility.
“In connection with the transaction, Daiichi Sankyo has agreed to indemnify Sun Pharma and Ranbaxy for, among other things, certain costs and expenses that may arise from the subpoena,” it said.
Ranbaxy’s all four plants have been banned by the USDFA for violations of manufacturing norms. In 2013, the company agreed to pay USD 500 million fine after pleading guilty to felony charges over manufacturing and distribution of adulterated drugs in the US.
In 2008, Japan’s Daiichi Sankyo had acquired majority stake in Ranbaxy for Rs 22,000 crore.