Sun Pharma shells out $4 bn for Ranbaxy, becomes biggest Indian pharma firm

India’s Sun Pharmaceutical Industries Ltd said it will buy generic drug maker Ranbaxy Laboratories Ltd, which has hit regulatory snags in its key US market over quality issues, in an all-share deal with total equity value of $3.2 billion, Reuters reported. However, Indian CNBC-TV18 reported that the deal is valued at $4 billion. Ranbaxy, India’s No.1 drugmaker by sales and 63.4 percent held by Daiichi Sankyo Co Ltd, is banned from exporting drug ingredients to the US, while Sun Pharmaceutical’s Karkhadi plant is also barred from shipping products by the US Food and Drug Administration. [caption id=“attachment_1468663” align=“alignleft” width=“380”]  Reuters[/caption] Sun Pharmaceutical said Ranbaxy shareholders will get 0.8 Sun Pharma shares for each Ranbaxy share. It added that the merged company will become the world’s fifth-largest specialty generics company and the largest drug firm in India. Ranbaxy, meanwhile, has said that the transaction brings significant value to all its shareholders. Daiichi Sankyo said in a statement that it will hold about a 9 percent stake in Sun Pharmaceutical after the deal, which has been agreed to by the boards of both companies. Sun Pharma has said Daiichi Sankyo will have the right to nominate one director on the company’s board. In a separate statement, Daiichi Sankyo said the US Attorney’s Office in New Jersey had issued an administrative subpoena to Ranbaxy seeking information related to the company’s Toansa plant in India. Ranbaxy is cooperating with the information request. Shares in Daiichi Sankyo climbed as much as 4.1 percent to a 2-1/2 month high of 1,827 yen in early Monday trade, outpacing a 1.2 percent decline in the benchmark Nikkei. On the Indian stock exchanges, Sun Pharma shares are likely to react negatively and Ranbaxy positively to the news. This is because investors are likely to be concerned that the Sun Pharma is taking over the problem child of Daiichi Sankyao, while for Ranbaxy shareholders this is going to be a good deal. Surajit Pal, analyst with Prabhudas Lilladher, told CNBC-TV18 that Sun Pharma would need to have a high fixed cost as it is acquiring a problem child. “Given the sales of Ranbaxy,valuation is fine. Because of the good track record of Sun Pharma and their good relationship with the US FDA, Ranbaxy may benefit. But It won’t translate into reducing the ban,” he told the channel. He said it will take the plants about 2-3 years to recover from the US FDA shocker. The deal also signals consolidation in the Indian pharma sector, where many players have come under fire from the US FDA for quality issues. With inputs from Reuters This article was originally published on Firstbiz