Matrix merges 4 firms via swap

The Hyderabad-based Matrix Laboratories announced a Rs 61 crore share-swap merger of four Andhra Pradesh-based companies with itself yesterday.

Matrix has merged with itself Vizag-based Vera Laboratories Ltd, Fine Drugs and Chemicals Ltd (FDCL), Medikon Laboratories Ltd and Calibre Engineering Private Ltd.

The share swap will see Matrix offer 4,19,653 shares to the four companies, representing about 2.5 per cent of its equity.

N Prasad, chairman and chief executive officer, at a press conference here today, said the move to merge loss-making Vera with itself was strategic.

"Vera's manufacturing facilities are US FDA-approved and has a small volume production block to facilitate manufacturing of low volume and high-value products. It will be a perfect fit for our business as there are no overlapping products between the two," Prasad said.

"It is difficult to get the US FDA-approved facilities and this is a very important acquisition for them. Significantly, Matrix is not paying much," a Mumbai-based analyst said. With the merger, Matrix will be one of the largest US FDA-approved active pharmaceutical ingredient manufacturers in the country.

"The merger will also also help in improving the already strong presence of Matrix in regulated markets by servicing its customers without any capacity constraints," Prasad said.

The Vera acquisition, according to Prasad, also helped Matrix de-risk its operations in India from a pollution view point. "Vera is located in a declared chemical zone in Vizag, while all our four manufacturing locations are in Hyderabad. They have the latest effluent treatment facility and we expect to transfer some of our difficult manufacturing processes to this unit soon," he said.

Vera, which had recorded losses of Rs 20 crore for the 18 months ended December 31, 2003 on a turnover of Rs 28.47 crore, has close to 30 products in its portfolio.

Vera manufactures Triaprofenic Acid and Baclofen and is the second company to manufacture Nefazodone.

Matrix will offer Vera shareholders one Matrix share of Rs 10 for every 163 shares of Rs 10 each of Vera.

The proposed mergers are subject to the approval of the shareholders, the High Court of Andhra Pradesh and other regulatory bodies. The appointed date for the merger is January 1, 2004.

Fine Drugs, the other company that Matrix has merged with itself, at present handles conversion jobs for Matrix. Matrix owns 49 per cent of the equity of FDCL which had as of December 31, 2003 posted revenues of Rs 9.22 crore and a net profit of Rs 72 lakh.

Matrix will offer FDCL shareholders one Matrix share of Rs 10 for every 25 shares of Rs 10 each of FDCL.