Sun Pharma’s share price up, to acquire Ranbaxy in a deal estimated to 3.2 billion dollars

The biggest drug maker by market value in India – Sun Pharmaceutical Industries Ltd announced that it reached an agreement over the purchase of Ranbaxy Laboratories Ltd in a deal estimated to 3.2 billion dollars in stock. This is considered to be the largest acquisition made by an Indian company in a period of two years.

Ranbaxy, which is one of the largest generic drug manufacturers worldwide has been recently trying to deal with the constantly increasing requirements of the Food and Drug Administration in the U.S. The latter is known for prohibiting the imports from four of Ranbaxys total of five factories in the country due to safety issues.

The deal was proposed by Sun Pharmaceutical Industries Ltd and is considered to be able to create the fifth largest speciality generics company worldwide and also the largest pharmaceutical group on the territory of India. Shareholders of Ranbaxy will get 0.8 stock in Sun Pharma for each of their shares. It also implies a price of Rs457 a share in Ranbaxy. According to information complied by S&P Capital IQ, the net debt of Ranbaxy is estimated to 750 million dollars at end December.

One of the analysts, who work for CIMB Securities India Pvt – Prakash Agarwal commented for Bloomberg: “It is a long-term positive for Sun Pharma because it adds emerging-markets facilities. Ranbaxy’s consent decree will be resolved in a few years’ time, so they should be out of the woods in terms of the FDA issues.”

The founder and current managing director of Sun Pharma – Dilip Shangvi – explained that the strong distribution network of Ranbaxy, especially in emerging markets provides the company with an advantage. As reported by the Financial Times, Mr. Shangvi said: “This transaction is a landmark in our journey to become a global company.” He also said to some experts that the merger between Sun Pharma and Ranbaxy is to create synergies estimated to 250 million dollars within a period of three years.

According to the Financial Times, shares of Sun Pharmaceutical Industries Ltd. gained 3.13%, while companys one-year return rate is 36.04%. The 41 analysts offering 12-month price targets for Sun Pharmaceutical Industries Ltd have a median target of 688.00, with a high estimate of 780.00 and a low estimate of 535.00. The median estimate represents a 20.32% increase from the last price of 571.80 INR.