Drug major Sun
Pharmaceutical Industries on Monday said it will acquire Daiichi
Sankyo-owned Ranbaxy Laboratories in an all-stock transaction totalling
equity value of USD 3.2 billion. Taking Ranbaxy's debt into account, the transaction
is worth over USD 4 billion. The deal between the two companies, both rapped by
the USFDA over quality issues, will create world's fifth-largest generic
drugmaker entity. "Ranbaxy has a significant presence in the Indian pharma
market and in the US where it offers a broad portfolio of ANDAs and
first-to-file opportunities.
In high-growth emerging
markets, it provides a strong platform which is highly complementary to Sun
Pharma’s strengths," Dilip Shanghvi, Managing Director of Sun Pharma said
in a release. Under the terms of the agreements, Ranbaxy shareholders will
receive 0.8 share of Sun Pharma for each share of Ranbaxy. Daiichi Sankyo, the
Japanese owner of India's biggest drugmaker by sales, will hold a stake of
about 9 percent in Sun Pharmaceutical after the deal. The deal values Ranbaxy
shares at Rs 457 apiece, representing an 18 percent premium to its 30-day
volume-weighted average share price on April 4, 2014.
The combination of Sun
Pharma and Ranbaxy will create the largest pharmaceutical company in India. Sun
expects to realise revenue and operating synergies of USD 250 million by third
year post closing of the transaction. The combined entity will have operations
in 65 countries, 47 manufacturing facilities across 5 continents, and a
significant platform of specialty and generic products marketed globally,
including 629 ANDAs. "On a pro forma basis, the combined entity’s revenues
are estimated at USD 4.2 billion with EBITDA of USD 1.2 billion for the twelve
month period ended December 31, 2013.
The transaction value
implies a revenue multiple of 2.2 based on 12 months ended December 31,
2013," Sun said in its release. CLSA Meanwhile, Arun Sahwney, managing
director and chief executive officer of Ranbaxy said the company believed 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," he added.
Sun Pharma said the
proposed transaction has been unanimously approved by the boards of directors
of Sun Pharma, Ranbaxy, and Ranbaxy’s controlling shareholder, Daiichi Sankyo.
Ranbaxy’s board and Sun Pharma’s board have recommended approval of the
transaction to their respective shareholders. While addressing conference call,
Daiichi Sankyo, which holds 63.4 percent stake in Ranbaxy, said it has agreed
to vote shares in Ranbaxy in favour of Sun Pharma's acquisition. "The transaction
is expected to close by December 2014," it added. Upon closing, Daiichi
Sankyo will become a significant shareholder of Sun Pharma and will have the
right to nominate one director to Sun Pharma’s Board of Directors. Citi and
Evercore are acting as financial advisors for the transaction to Sun Pharma
while Ranbaxy’s financial advisor for the transaction is ICICI Securities.
In a separate statement,
Ranbaxy Laboratories said United States Attorney's Office for the District of
New Jersey has issued an administrative subpoena to company seeking information
primarily related to the company's API Toansa manufacturing facility in India
for which a Form 483 was issued by FDA culminating into import alert. The
Toansa facility is subject to certain terms of Consent Decree entered against
Ranbaxy in January 2012. Brokerare house Macquarie said the deal valuations are
compelling for Sun Pharma and will not lead to earnings dilution for Sun
Pharma. Ranbaxy Labs stock price On April 07, 2014, Ranbaxy Laboratories closed
at Rs 445.20, down Rs 14.35, or 3.12 percent. The 52-week high of the share was
Rs 505.00 and the 52-week low was Rs 253.95. The latest book value of the
company is Rs 45.34 per share. At current value, the price-to-book value of the
company was 9.82.
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