Ranbaxy, Sun Pharmaceutical deal

Sun will acquire fellow Indian generics company Ranbaxy in a stock deal that the companies said values Ranbaxy at $3.2 billion. The deal comes as Ranbaxy faces significant compliance issues in the U.S., where FDA has issued import alerts on at least two Ranbaxy facilities within the past year due to "significant" cGMP violations. Ranbaxy is prohibited from manufacturing APIs for FDA-regulated drugs until the facilities are in compliance with cGMP standards; the facilities are also part of a consent decree with FDA (see BioCentury, Jan. 27 & March 10).

The companies said the deal will create the fifth largest specialty generics company in the world and the largest pharma in India. Ranbaxy reported 2013 sales of Rs106 billion ($1.7 billion). Sun reported net sales of Rs119.6 billion ($1.9 billion) for the nine-month period ended Dec. 31, 2013. Ranbaxy shareholders will receive 0.8 shares in the combined company for each share held and will collectively own about 14% of the combined company. Daiichi Sankyo Co. Ltd. (Tokyo:4568, Tokyo, Japan), which owns a 63.4% stake in Ranbaxy, will become the second largest shareholder in the combined company and will hold about a 9% stake. Daiichi's stake in the combined company is valued at about $1.7 billion. The pharma paid about $4.2 billion for a 63.9% stake in Ranbaxy in 2008. Sun is also assuming about $0.8 billion in net debt from Ranbaxy (see BioCentury, Nov. 17, 2008). ...