Illinois-based Abbott has entered into a definitive agreement to acquire Piramal Healthcare's domestic formualtions business - also referred to healthcare solutions business - for total cash consideration of $3.72 billion, which includes $2.12 billion payable on closing of the sale and a further $400 million upon each of the subsequent four anniversaries of the closing, commencing in 2011.
According to a stock exchange announcement, Piramal's domestic formulations business manufactures, markets and sells branded pharmaceutical products in finished form. The domestic formulations business is currently conducted in India, Nepal and Sri Lanka and is being sold as a going concern on a slump rate basis.
The assets to be transferred include the company's manufacturing facilities at baddi, Himachal Pradesh and rights to approximately 350 brands and trademarks. The sale will also involve the transfer of employees of the domestic formulations business.
The sale is conditional upon Piramal's shareholder approval. As a term of the sale, Piramal and Piramal Enterprises/Associates have agreed that for a period of eight years following the deal closure, the company will not engage in the business of generic pharmaceutical products in finished form in India, nor will it engage in emerging markets in manufacturing or marketing the pharmaceutical products, which are the subject of the sale. However, Piramal will remain free to continue its retained business.
Ajay Piramal, chairman, Piramal group said while addressing the media: "We expect the deal to close in the second half of the current financial year 2010-11... The annual payment of $400 million is not contingent on performance... Over 5,000 employees would be transferred to Abbott... Will pay 22 % long term capital gains tax... will look at giving special dividend... will use funds for retiring debt, expansion."
Shares of Piramal Healthcare were trading higher by 1.51 per cent at Rs 578.25 during the afternoon session.
