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Japan's Meiji Holdings acquires Medreich for Rs 1,720 Cr

The Economic Times:  June, 2014

Mumbai: Japanese pharmaceutical major Meiji Holdings has bought out Temasek-backed Medreich for $290 million (Rs 1,720 crore), the company informed Tokyo Stock Exchange on Wednesday, marking the first inbound investment in the Indian pharmaceutical sector by a Japanese company after Daiichi Sankyo's ill-fated acquisition of Ranbaxy in 2008.

Temasek, the private equity arm of the Singapore government, had invested Rs 109 crore in 2005 for a 25 per cent stake in Medreich which manufactures therapeutic generic and branded drugs. Temasek has made almost a four-fold return on its investment in the company by getting around Rs 430 crore from this transaction.

"Meiji, through its operating subsidiaries, Meiji Seika Pharma, has bought out 100 per cent stake in Medreich as it plans to enter the Indian market," said a person with direct knowledge of the deal. As part of the Japanese company's 2020 vision, it wants to expand to newer geographies, the person explained.

Medreich sells generic pharmaceuticals products to Europe, Asia, and Africa. Its main business partners include GSK, Adcock Ingram, Pfizer, Sanofi, Novartis and Mylan, among others. "The Meiji Group wants to enter the global generics field, particularly in Asia and emerging countries," the company's release in Japanese read.

The $5-billion Meiji Group's acquisition signals a return of longterm confidence in the Indian pharmaceutical sector. Last month, in an all-share transaction, Sun Pharmaceutical Industries bought generic drugmaker Ranbaxy Laboratories for $3.2 billion. Daiichi had paid $4.2 billion for a 69 per cent stake in Ranbaxy in 2008.

"If multinational companies have to make a mark in India, they cannot grow organically, and if they have to acquire companies, they will trigger the foreign direct investment issue," said Sujay Shetty, head of life sciences at consultancy PwC when the Ranbaxy-Sun Pharma deal was announced.

Investment bank JP Morgan was the advisor to Meiji Holdings and NM Rothschild advised the investors and promoters of Medreich. Medreich, founded in 1976 by Rajeev Mehta, Keith De Souza and CP Bothra, has the capability to produce over 500 products with an R& D team of over 75 scientists. The company has been profitable since its inception. The company's branding and name will not be changed post the acquisition, Meiji Holdings has said.

For Temasek, this marks a blockbuster exit from an Indian company. Temasek has made several large private equity investments in India, including in Bharti Airtel, Tata Teleservices in Maharashtra, GMR Energy, National Stock Exchange and Godrej Consumer Products.