Sun Pharmaceutical Industries Ltd.and Ranbaxy Laboratories Ltd today 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 represents an
implied value of `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 April 4, 2014.
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 US$ 4.2 billion with EBITDA of US$
1.2billion for the twelve month period ended December 31, 2013.The
transaction value implies a revenue multiple of 2.2based on12 months
ended December 31, 2013.
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 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 US$ 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. This exchange ratio represents 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 April 4, 2014.The transaction has a
total equity value of approximately US$ 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.
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