At a time when both are up against quality compliance issues with health regulator in the lucrative US market, Sun Pharmaceuticals Industries today announced that it will fully acquire Ranbaxy Laboratories Ltd in an all-stock transaction deal valued at USD 3.2 billion.
Creating the fifth-largest speciality generics company in the world, the two companies said they will become the largest pharmaceutical company in India.
The announcement comes at a time when Ranbaxy is struggling with quality compliance issues as all its four plants in India have been banned by the USFDA from exporting products to the US. Similarly, Sun's Karkhadi plant is also barred from shipping products to the US for violation of good manufacturing norms.
Under the agreements announced today, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy, representing 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.
"The transaction has a total equity value of approximately USD 3.2 billion," the two companies said in a joint statement.
The combined entity's revenues are estimated at USD 4.2 billion with operations in 65 countries, 47 manufacturing facilities across five continents, and a significant platform of speciality and generic products marketed globally, including 629 ANDAs (abbreviated new drug applications).
Later addressing a conference call, Sun Pharma Managing Director Dilip Shanghvi said: "There is is very little product specific overlap between Ranbaxy and Sun products. So there is enormous amount of oopurtunity...It gives us leadership position in chronic therapy, in acute care, hospitals… In the US which is the largest market for Sun, we can now further strengthen, with many more ANDAs waiting approval and also first to file opportunities."
Sanghvi, however, declined to put a timeframe on expected approvals for Ranbaxy's applications in the US.
"The first important issue for us is to focus on is to achieve compliance. Only once the facility is re-certified we can look at new product approvals from this facility...all I can is promise is that it would be the most important