India's Sun Pharma buys troubled drugmaker Ranbaxy in $4 billion deal

MUMBAI, India – India’s Sun Pharmaceutical Industries is buying troubled generic drugmaker Ranbaxy Laboratories in a $4 billion deal, the companies said Monday.

The combined company will be India’s biggest pharmaceutical firm, with annual revenue estimated at $4.2 billion.

Sun Pharma shares rose 1.7 per cent. Shares of Ranbaxy, which is 63-per cent owned by Japan’s Daiichi Sankyo, were down 4.8 per cent on the Bombay Stock Exchange.

Ranbaxy is the leading drugmaker in India’s $26 billion generic pharmaceutical industry, but it has faced penalties from U.S. regulators for years. The U.S. has banned imports of drugs from two of its factories because of concerns about quality control.

The acquisition will allow Sun Pharma to tap into Ranbaxy’s strong global presence and manufacturing capabilities. The combined company will have 47 factories across five continents and operations in 65 countries, said Dilip Shanghvi, Sun Pharma’s managing director.

“In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma’s strengths,” Shanghvi said. “We see tremendous growth opportunities.”

Sun Pharma said the transaction value includes $3.2 billion in stock and nearly $800 million of Ranbaxy debt. Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share of Ranbaxy with an implied value of 457 rupees, a premium of 18 per cent to Ranbaxy’s average share price over 30 days.

Ranbaxy shareholders are expected to own 14 per cent of the new company and Ranbaxy’s parent company, Daiichi Sankyo, will be the largest single shareholder.

Ranbaxy has annual revenue of about $2 billion.

The acquisition is subject to approval of shareholders of both Sun Pharma and Ranbaxy.