Sun Pharmaceutical Industries gained 3.7% to Rs 609 at 09:46 IST on BSE, with the stock extending Monday's gain triggered by plans to acquire 100% of Ranbaxy Laboratories in an all-stock transaction.
Shares of Ranbaxy Laboratories rose 1.47% at Rs 451.75.
Meanwhile, the S&P BSE Sensex was up 72.72 points or 0.33% at 22,416.17
On BSE, so far 1.10 lakh shares of Sun Pharmaceutical Industries exchanged hands compared to average daily volume of 1.66 lakh shares in the past one quarter.
The stock hit a high of Rs 610 and a low of Rs 595.05 so far during the day. The stock hit a record high of Rs 653.10 on 3 March 2014. The stock hit a 52-week low of Rs 423.18 on 10 April 2013.
The stock had underperformed the market over the past one month till 7 April 2014, falling 4.07% compared with the Sensex's 1.93% rise. The scrip had also underperformed the market in past one quarter, falling 1.09% as against Sensex's 7.97% rise.
The large-cap company has an equity capital of Rs 207.12 crore. Face value per share is Re 1.
Sun Pharmaceutical Industries (Sun Pharma) and Ranbaxy Laboratories (Ranbaxy) before market hours on Monday, 7 April 2014 announced that they have entered into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. Under these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio represented an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on 4 April 2014, Sun Pharma and Ranbaxy had said in a combined statement. The announcement was made before market hours on Monday, 7 April 2014.
Shares of Sun Pharma had settled with a gain of 2.68% to Rs 587.25 on Monday, 7 April 2014. Shares of Ranbaxy had declined 3.12% to settle at Rs 445.20 on Monday, 7 April 2014. Shares of Sun Pharma gained 6.48% in two trading days from a recent low of Rs 571.90 on 4 April 2014. The stock market was closed on Tuesday, 8 April 2014 on account of Ram Navami.
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 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. On a pro forma basis, the combined entity's revenues are estimated at $4.2 billion with EBITDA of $1.2 billion for the twelve month period ended December 31, 2013. The transaction value implies a revenue multiple of 2.2 based on 12 months ended December 31, 2013, the statement from Sun Pharma and Ranbaxy said.
The proposed transaction has been unanimously approved by the Boards of Directors of Sun Pharma, Ranbaxy, and Ranbaxy's controlling shareholder, Daiichi Sankyo. Ranbaxy's board and Sun Pharma's board have recommended approval of the transaction to their respective shareholders.
The combination will create a large specialty pharmaceutical company with strong capabilities in developing complex products and exploiting first to file opportunities. A combined Sun Pharma and Ranbaxy will have a diverse, highly complementary portfolio of specialty and generic products targeting a spectrum of chronic and acute treatments. The combined business will have a strong portfolio of specialty and generic products marketed globally, including 445 ANDAs. Additionally, the combination will create one of the leading dermatology platforms in the United States.
The combination creates the fifth-largest generic company in the world and the largest pharmaceutical entity in India. The combined entity will have 47 manufacturing facilities across 5 continents. The transaction will combine Sun Pharma's proven complex product capabilities with Ranbaxy's strong global footprint, leading to significant value creation opportunities. Additionally, the combined entity will have increased exposure to emerging economies while also bolstering Sun Pharma's commercial and manufacturing presence in the United States and India. It will have an established presence in key high-growth emerging markets. In India, it will be ranked No. 1 by prescriptions amongst 13 different classes of specialist doctors.
The acquisition is expected to be accretive to Sun Pharma's cash earnings per share in the first full year. Additionally, Ranbaxy's shareholders will participate in the value creation of the combined company through their ownership of Sun Pharma shares. Sun Pharma expects to realize revenue and operating synergies of $250 million by third year post closing of the transaction. These synergies are expected to result primarily from topline growth, efficient procurement and supply chain efficiencies. As part of the transaction, Sun Pharma intends to leverage the human capital that has supported both companies, in order to drive future growth.
Under the agreements, Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share of Ranbaxy. The transaction has a total equity value of approximately $3.2 billion. The transaction is expected to represent a tax-free exchange to Ranbaxy shareholders, who are expected to own approximately 14% of the combined company on a pro forma basis. Upon closing, Daiichi Sankyo will become a significant shareholder of Sun Pharma and will have the right to nominate one director to Sun Pharma's Board of Directors. Ranbaxy has recently received a subpoena from the United States 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. In connection with the transaction, Daiichi Sankyo has agreed to indemnify Sun Pharma and Ranbaxy for, among other things, certain costs and expenses that may arise from the subpoena.
The transaction will need approval by majority in number representing 75% in value of the shares present and voting at the shareholder meetings of each of Sun Pharma and Ranbaxy. Both Daiichi Sankyo (which holds approximately 63.4% of the outstanding shares of Ranbaxy) and promoters of Sun Pharma (who hold approximately 63.7% of the outstanding shares thereof), have irrevocably agreed to vote in favor of the transaction.
Additionally, the closing of the transaction will be subject to customary closing conditions, including approval by the Indian Central Government, approval by the High Courts of Gujarat and Punjab and Haryana, approval by the Competition Commission of India and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act in the United States. Pending approvals, Sun Pharma anticipates that the transaction will close by the end of calendar year 2014.
Sun Pharmaceutical Industries' consolidated net profit surged 73.7% to Rs 1531.09 crore on 50.3% growth in net sales to Rs 4286.59 crore in Q3 December 2013 over Q3 December 2012.
Sun Pharmaceutical Industries is an international specialty pharmaceutical company with over 72% sales from global markets. It manufactures and markets a large basket of pharmaceutical formulations as branded generics as well as generics in US, India and several other markets across the world.
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