Ahmedabad-based T Torrent Pharmaceuticals Ltd has acquired Elder Pharmaceutical’s branded domestic formulations business in India and Nepal for a consideration of Rs 2,004 crore.
The deal will transfer Elder’s brands along domestic business employees to Torrent. The company will retain control of tangibles such as plant and facilities, and will continue to make and supply products for Torrent for three years.
Elder shares plunged by 8.17 per cent to Rs 298.30 after it emerged the company had put its core business, comprising key brands such as calcium-supplement Shelcal, on the block. Analysts said after payment of debt and taxes, Elder would only be left with cash of about Rs 400 crore and peripheral businesses that are not as profitable as the one it has sold. Torrent Pharma shares also fell by 4.04 per cent to Rs 479.50 on the BSE.
Torrent would acquire Elder’s Indian business that comprises of 30 brands in segments such as women’s healthcare, pain management, wound care and neutraceuticals therapeutic segments. The India business is being sold as a going concern on a slump sale basis and the transaction will also involve the transfer of employees engaged in sales, marketing and operations of the India business. Torrent would fund the acquisition value through a mix of internal accruals and bank debt. Elder’s existing brand equity in the areas of women healthcare and pain management will help Torrent strengthen its position in the Indian market expanding into these fast growing areas.
“This path breaking domestic consolidation by Torrent addresses our recent challenges and will significantly help Elder de-leverage its balance sheet. We will now focus and grow our in-licensing, anti-infectives and exports business,” said Alok Saxena, MD and CEO, Elder.
“It (deal) is also expected to enable cost and revenue synergies in Torrent’s domestic formulations business,” said Sudhir Mehta, chairman, Torrent Group. The transaction has been approved by the boards of directors of both companies. The transaction is subject to customary conditions precedent including shareholder approval and applicable regulatory approvals and is expected to close in the first half of 2014.
Elder has six manufacturing facilities for manufacturing formulations and APIs. Torrent Pharma, with an annual turnover of over Rs 3,200 crore is the flagship company of the Torrent Group.