The combined business will become India's largest pharmaceutical company
India's Sun Pharmaceutical has agreed to purchase rival Ranbaxy Laboratories, which is majority owned by Daiichi Sankyo of Japan, in an all-stock deal worth US$3.2bn.
Under terms of the deal, Ranbaxy shareholders will get 0.8 of a Sun Pharma share for each Ranbaxy share they own. Including Ranbaxy debt, the overall value of the transaction is $4bn.
The combined business will become India's largest pharmaceutical company and the fifth-largest generics drugmaker. Together they will have operations in 65 countries, 47 manufacturing plants across five continents and a significant number of specialist and generic products marketed globally, including 629 ANDAs.
On a pro forma basis, combined revenues are estimated at $4.2bn with EBITDA of $1.2bn to 31 December 2013.
The move comes at a time when Ranbaxy is under investigation by the US Food & Drug Administration for manufacturing failings at its Toansa plant in the Punjab.
In high-growth emerging markets, Ranbaxy provides a strong platform which is highly complementary to Sun Pharma’s strengths
The firm has also received a subpoena from the US Attorney for the District of New Jersey asking it to produce certain documents relating to issues previously raised by the FDA with respect to the Toansa facility.
As part of the sale agreement, Ranbaxy's majority shareholder Daiichi Sankyo has agreed to 'indemnify Sun Pharma and Ranbaxy for, among other things, certain costs and expenses that may arise from the subpoena'.
'Ranbaxy has a significant presence in the Indian pharma market and in the US,' said Dilip Shanghvi, Managing Director of Sun Pharma.
'In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma’s strengths. We see tremendous growth opportunities.'
Arun Sahwney, Managing Director and Chief Executive of Ranbaxy, added: 'We are confident that Sun Pharma is the ideal partner to help us realise our full potential and are excited to participate in future value creation opportunities.'
Sun Pharma says the deal has been unanimously approved by the Boards of Directors of Sun Pharma, Ranbaxy, and Ranbaxy’s controlling shareholder, Daiichi Sankyo. They have recommended approval to their respective shareholders although it has yet to be approved by the regulators. Pending approvals, Sun Pharma anticipates that the transaction will close by the end of 2014.