Shares in Sun Pharmaceuticals Industries and Ranbaxy Laboratories are trading higher by up to 5% as UBS raised the rating on these stocks to ‘Buy’ after the acquisition deal.
Sun Pharma has rallied 5% to Rs 618 and Ranbaxy Laboratories is up 3% at Rs 459 on the National Stock Exchange (NSE).
Sun Pharma on Monday announced that it will acquire 100% of Ranbaxy Laboratories in a $4 billion all-share transaction.
Both companies said that they had entered definitive agreements under which Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for every share of Ranbaxy.
Meanwhile, according to an analyst at HDFC Securities, Sun's history of acquisitions has been the most promising among its Indian peers given the turnaround of Taro and the handling of persistent FDA issues at Caraco's plant. Hence, there is immense comfort in this buyout.
Being an all-stock transaction, incrementally, the deal will not drain the balance sheet of Sun but only dilute its equity by around 20%. Moreover, Ranbaxy has been valued at a mere 2.2x its CY13 sales and probably less than 1.0x its potential CY13 sales. This points to a huge potential to create value for the shareholders of both Sun as well as Ranbaxy over the next 2/3 years, said the analyst in a report.
Sun Pharma has rallied 5% to Rs 618 and Ranbaxy Laboratories is up 3% at Rs 459 on the National Stock Exchange (NSE).
Sun Pharma on Monday announced that it will acquire 100% of Ranbaxy Laboratories in a $4 billion all-share transaction.
Both companies said that they had entered definitive agreements under which Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for every share of Ranbaxy.
Meanwhile, according to an analyst at HDFC Securities, Sun's history of acquisitions has been the most promising among its Indian peers given the turnaround of Taro and the handling of persistent FDA issues at Caraco's plant. Hence, there is immense comfort in this buyout.
Being an all-stock transaction, incrementally, the deal will not drain the balance sheet of Sun but only dilute its equity by around 20%. Moreover, Ranbaxy has been valued at a mere 2.2x its CY13 sales and probably less than 1.0x its potential CY13 sales. This points to a huge potential to create value for the shareholders of both Sun as well as Ranbaxy over the next 2/3 years, said the analyst in a report.
