Sun Pharmaceutical Industries Ltd. (SUNP), India’s largest drugmaker by market value, agreed to buy Ranbaxy Laboratories Ltd. (RBXY) in a $4 billion stock transaction, the biggest purchase by an Indian company in two years.
Ranbaxy investors will get 0.8 share in Sun for every one of their shares, the two companies said today in a statement. That’s equal to about 457 rupees a share, or about 24.3 percent higher than the 60-day average, according to the statement. Ranbaxy rose 8.2 percent to 459.55 rupees on April 4.
Sun, maker of generic drugs including copies of Eli Lilly & Co.’s Cymbalta and Johnson & Johnson’s Doxil, expects $250 million in revenue and reduced costs by the third year after the completion of the deal, according to the statement. Since Daiichi Sankyo bought control of Ranbaxy in 2008, four of its Indian plants have been banned from exporting to the U.S. for failing to meet standards.
“It is a long-term positive for Sun Pharma because it adds emerging-markets facilities,” said Prakash Agarwal, an analyst at CIMB Securities India Pvt. in Mumbai. “Ranbaxy’s consent decree will be resolved in a few years’ time, so they should be out of the woods in terms of the FDA issues.”
Daiichi Sankyo Co. (4568), which owns 63.5 percent of Gurgaon, India-based Ranbaxy, said it planned to vote in favor of the deal. The transaction will help Daiichi Sankyo’s earnings, Takashi Akahane, a health-care analyst at Tokai Tokyo Research Center Co. in Tokyo, said by telephone. “Daiichi Sankyo seems to have backed off from directly getting involved with business in India and left it to a local company.”
Ranbaxy Surge
Daiichi Sankyo surged as much as 5.1 percent, the biggest intraday gain in more than nine months, to 1,844 yen in Tokyo trading today. The stock traded at 1,821 yen, up by 3.8 percent, at 11:27 a.m. local time.
Ranbaxy shares rose 8.2 percent to 459.55 rupees in Mumbai trading on April 4. That took its gain for last week to 26 percent, the largest weekly advance since August.
The transaction has an equity value of about $3.2 billion, according to the statement.
Ranbaxy recently received a subpoena from the U.S. Attorney for the District of New Jersey requesting certain documents relating to issues previously raised by the FDA on its Toansa facility in north India, Sun Pharma said in the statement. The FDA in January said Ranbaxy can no longer make or distribute drug ingredients from that plant to the U.S.
FDA Rules
FDA officials have said they plan to tighten rules on how they regulate the generic-drug industry as a way to convince American consumers that safeguards are in place.
In March, the Food and Drug Administration said Ranbaxy was recalling some batches of its generic cholesterol-lowering medicine.
India’s pharmaceutical industry exported $14.6 billion worth of products in the year ended March 2013, according to data from the Ministry of Commerce. India is the second-largest supplier of over-the-counter and prescription drugs to the U.S., behind Canada.
Sun Pharma was advised by Citigroup Inc. and Evercore Partners Inc. Ranbaxy hired ICICI Securities as its financial adviser and Goldman Sachs Group Inc. advised Daiichi Sankyo.
Sun Pharma’s legal advisers are Shearman & Sterling LLP, Crawford Bayley & Co and S. H. Bathiya & Associates, while Ranbaxy’s advisors are Luthra & Luthra Law Offices, Amarchand & Mangaldas & Suresh A Shroff & Co. Daiichi Sankyo hired Davis Polk & Wardwell LLP and Amarchand & Mangaldas & Suresh A Shroff & Co, it said.
To contact the reporters on this story: David Welch in New York at dwelch12@bloomberg.net; Kanoko Matsuyama in Tokyo atkmatsuyama2@bloomberg.net
To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net Anjali Cordeiro, Frank Longid
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