Posted by : Varun Doshi
On : 28 January 2015
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Views : 1659
We have constantly been following this update from day one. After the initial announcement of the merger, Andhra Pradesh HC ordered temporary halt on the deal in response to a writ petition filed by two Ranbaxy shareholders, Tammali Shiva Kumar and Undi Venkatasubbaraju. After that the Andhra Pradesh HC lifted the stay in June last year on the orders from the the SC to Andhra Pradesh HC to decide Sun-Ranbaxy issue in two days.
The latest update is that, Sun Pharma's USD 4-billion Ranbaxy deal is likely to be concluded by February end. According to an official release, Punjab and Haryana High Court will hear the issue of merger on February 2 and once approved from the court, it will take a few more days for the deal to be concluded.
"We need to meet certain company laws. So, hopefully by the end of February we should be able to close the deal," Sun Pharma managing director Dilip S Shanghvi informed emphasising on the need and challenge to be able to regain the confidence and trust of the regulators following the USFDA ban on Ranbaxy facilities.
In April last year, Sun Pharma and Ranbaxy had announced that they entered into definitive agreements pursuant to which Sun Pharma will acquire 100 per cent of Ranbaxy in an all-stock transaction in a USD 4-billion deal. Sun Pharma had earlier said it would try to leverage Ranbaxy's strong presence in some of the geographies where it was not present.
India’s antitrust regulator Competition Commission of India (CCI) had cleared the deal on the condition that the companies divest seven brands of medicines within six months. As per the CCI order, Sun and Ranbaxy were to sell seven brands in which the two merged companies would have “appreciable adverse effect” on competition in India as a result of their market share.
Both the companies had to appoint a senior management employee, within seven days of the date of the order, that is December 5, to oversee the transition. The representative will make a monthly report to CCI on the economic viability, marketability and competitiveness of the divestment product.
CCI had earlier ordered a so-called second-stage investigation into the merger of Sun Pharmaceuticals and Ranbaxy, citing the risk that the deal could harm national interest by resulting in significant market domination by the combined entity.
“The order of the CCI approving the deal is an important milestone for the transaction. It revalidates our view that the Sun Pharma and Ranbaxy businesses complement each other with limited product overlap, and will offer a comprehensive product basket to enable future growth. We are pleased with the open and transparent manner in which the matter has progressed,” Dilip Shanghvi, managing director of Sun Pharma, said in an official statement.
Arun Sawhney, chief executive officer and managing director of Ranbaxy, said the approval by CCI is a significant step forward and his company is confident that after closure the combined entity will enable sustainable long term growth and deliver immense value for all stakeholders. Sun Pharma will own nearly 54.7 per cent of the equity share capital in the new entity set to be created. The merger is also subject to both companies divesting certain drugs.
One of the preconditions of the order is that parties divest seven products. These products constitute less than 1 per cent of the combined entity’s revenues in India.