New Delhi, April 7
Sun Pharma, India’s most valuable pharma company by market capitalisation, today said it is acquiring Ranbaxy Laboratories from Japanese MNC Daiichi Sankyo in an all-share deal for $ 3.2 billion. The ownership of beleaguered Ranbaxy has now changed hands twice in six years.

In 2008, Daiichi had acquired the once iconic Ranbaxy from the Singh family, Malvinder and Shivinder Singh. The value of the company has since halved. Daiichi Sankyo had acquired majority stake in Ranbaxy for Rs 22,000 crore.

The combination of Sun Pharma and Ranbaxy creates the fifth largest specialty generics company in the world and the largest pharmaceutical company in India.

The combined entity will have operations in 65 countries, 47 manufacturing facilities across five continents, and a significant platform of specialty and generic products marketed globally. The combined entity’s revenues are estimated at $ 4.2 billion.

Ranbaxy has been beset with severe regulatory problems with the US drug regulator, US FDA, for the past five years which has pronounced export curbs on all its manufacturing facilities in Mohali, Toansa, Paonta Sahib and Dewas. Ranbaxy has recently received a subpoena from the US Attorney for the District of New Jersey requesting that Ranbaxy produce certain documents relating to issues previously raised by the FDA with respect to Ranbaxy's Toansa facility.

Since exports and the US market are the mainstay of the generics business, Daiichi that was the bearing the brunt seems to have agreed to sell the company, which analysts said was a very good buy for Sun. The new buyer has a track record of turning around acquisitions and has become the pre-eminent pharma company in India in the last few years while others such as Ranbaxy struggled. Daiichi Sankyo and its erstwhile promoters - Malvinder and Shivinder Singh - have been involved in a spat earlier regarding the US Department of Justice and FDA investigations into Ranbaxy.

Under the agreement signed today, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30-day share price. Sun Pharma gained nearly 3 per cent while Ranbaxy stock ended nearly 4 per cent down post the deal.

Dilip Shanghvi, Managing Director of Sun Pharma said: “Ranbaxy has a significant presence in the Indian pharma market and in the US where it offers a broad portfolio of ANDAs and first-to-file opportunities. In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma’s strengths”. “We believe this transaction brings significant value to all Ranbaxy shareholders. Sun Pharma has a proven track record of creating significant long-term shareholder value and successfully integrating acquisitions into its growing portfolio of assets,” said Arun Sahwney, Managing Director and Chief Executive Officer of Ranbaxy.

Edelweiss said in a research noted the merger is a positive development for Sun Pharma given the complementarities of businesses, Ranbaxy’s depressed profitability and valuations.