Shares of Sun Pharmaceuticals Ltd gained more than 4% intraday on Monday after the company announced that it will acquire Gurgaon-based troubled pharmaceutical peer, Ranbaxy Laboratories, for about $3.2 billion in an all-stock deal to combine and consolidate market share.
Experts believe the deal will give Ranbaxy shareholders a stake in a more successful company. “Sun Pharma will be able to manage the acquired assets better. This deal is a long-term positive for both the players. Ranbaxy shareholders would get a stake in a more stable and successful company. The consolidation will raise the merged entity’s domestic market share to 9.2% compared with Sun Pharma’s current domestic share of 5.4%. The new entity will become the world’s 5th largest generic drugs company with sales of $4.3 billion,” said Alok Dalal, pharma analyst, Motilal Oswal Financial Services.
As per the deal, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. “This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy’s 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014,” Sun Pharma said in an exchange release on Monday.
After the deal, Daiichi Sankyo which currently hold 63.41% in Ranbaxy, will hold 9% in the merged entity.
“We believe this 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,” Ranbaxy CEO Arun Sahwney said in a statement.
Ranbaxy has been in US Food and Drug Administration crosshairs since 2008, with four of its production facilities under an import alert owing to non-compliance with good manufacturing standards.
The Sun Pharma scrip was trading 1.43% higher at Rs 580.10 at 12.45 pm IST on the BSE Sensex, while shares of Ranbaxy Laboratories were trading 5.14% lower at Rs 436.