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Sun Pharma-Ranbaxy combine promises compelling synergies

Sun Pharma-Ranbaxy combine promises compelling synergies

Aparna Dutt Sharma, Chief Executive Officer, IBEF

Apr 14, 2014 12:00 PM

Indian pharma major Sun Pharmaceuticals Industries announced its decision to acquire Gurgaon based Ranbaxy Laboratories from Daiichi Sankyo on April 7 for US$ 4 billion. Shareholders of Ranbaxy Laboratories, which was acquired by Daiichi Sankyo in 2008, are reportedly to get 0.8 shares of Sun Pharma for every share of Ranbaxy owned by them. While the transaction involves US$ 3.2 billion in terms of the equity component for Daiichi Sankyo’s 63.4 per cent stake, Sun Pharma will also acquire US$ 800 million in debt. Being an all stock transaction, the acquisition also provides Sun Pharma US$ 500 million of extra liquidity on its books for further expansion. Markets have reacted positively to the development with Sun Pharma’s scrip closing higher by 6.8 per cent on April 11 compared to its closing value on April 7 when the acquisition was announced.

For Sun Pharma, which has an enviable track record of successful acquisitions, the acquisition brings some very compelling synergies. The company will see its product range expand considerably since the two players have complementary product and therapeutic portfolios. Besides Sun Pharma will also be able to expand its geographical reach and manufacturing capacity. Post acquisition, Sun Pharma will have 47 manufacturing facilities across 65 countries and a strong base of specialty and generic drugs along with 629 abbreviated new drug applications (ANDAs). The combine will also be a leader in four major therapy segments with a combined market share of 9.2 per cent in India and be the largest Indian pharma company in the US. In conclusion, the acquisition certainly provides a strong boost to the global ambitions of Sun Pharma, making it the world’s fifth largest specialty generics drug maker with combined sales of the two companies at US$ 4.2 billion in the year ending December 2013. Sun Pharma’s proven abilities to turn around acquired pharma companies should bode well for Ranbaxy Laboratories. With strong domain leadership coupled with its impeccable speed to market, Sun Pharma should be able to profitably integrate and leverage Ranbaxy’s product portfolio and operations. On a larger canvas, this development should contribute to India’s brand image as the Pharmacy of the world with responsible healthcare.

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