In one of the largest domestic acquisitions, Sun Pharmaceutical Industries Ltd, on Monday agreed to buy Ranbaxy Laboratories Ltd for $3.2 billion. Including Ranbaxy’s debt, the overall transaction stands at nearly $4 billion. The all-stock deal is one of the biggest transactions not only in the Indian pharma sector but also across the Asia-Pacific region. The combined entity will emerge as the world’s 5th largest generics producer.
The deal catapults Sun as the biggest generics firm by sales in India, with an estimated combined revenue of $4.2 billion. Sun is currently India’s largest drug maker by market value.
As per the agreement, Ranbaxy shareholders will get 0.8 of a Sun Pharma share for each Ranbaxy share they own. The deal is expected to close by the end of 2014.
For Ranbaxy’s existing owner Daiichi Sankyo, the transaction comes as a major breather with the Japanese major facing intense criticism from the US health regulator over Ranbaxy’s manufacturing processes at its India plants.
Daiichi acquired a 63.9 per cent stake in Ranbaxy from its erstwhile owners — Malvinder and Shivinder Singh — for $4.2 billion. With the acquisition, Daiichi will have about 9 per cent stake in Sun valued at $2 billion and will be the second largest shareholder in Sun.
“This transaction helps us transition to our long-held ambition of becoming a successful Indian company in the global pharmaceutical space,” said Dilip Shanghvi, MD, Sun Pharma. According to him, the combined entity would focus on fixing manufacturing quality issues at Ranbaxy in order to resume exports.
Sun expects the acquisition to be accretive to earnings per share in the first full year and expects revenues of $250 million and operating synergies by the third year.