Sun Pharmaceutical to Buy Ranbaxy in $3.2 Billion Deal
FDA Has Barred Imports From Four Out of Five of Ranbaxy's Factories in India
Some tablets made by Ranbaxy are arranged for a photograph in Mumbai, in a file photo from Feb. 20. Bloomberg News India's Sun Pharmaceutical Industries Ltd. 524715.BY +2.50% is taking over troubled domestic rival Ranbaxy Laboratories Ltd. 500359.BY -2.41% from its Japanese owner, Daiichi Sankyo Co. 4568.TO +3.59% , which struggled for years to turn around the company, in a deal valued at US$3.2 billion.
Ranbaxy, one of the world's biggest generic drug makers, has battled to overcome increasingly stringent regulatory measures by the U.S. Food and Drug Administration, which has barred imports from four out of its five factories in India, on safety concerns.
Before the ban, the U.S. market accounted for around 40% of Ranbaxy's revenues. Ranbaxy accounted for 20% of Daiichi Sankyo's revenues, the company said earlier this year.
The deal to sell Ranbaxy is a sign that Daiichi Sankyo is retreating from an expensive effort to clean up Ranbaxy's drug-making process. Japan's second biggest drug maker, which has spent tens of millions of dollars each year on the efforts, acquired a controlling stake in Ranbaxy in 2008 for $4.6 billion.
Mumbai-listed Sun Pharma, one of India's largest generic drug companies, will pay Ranbaxy shareholders using its own shares, offering 0.8 Sun Pharma share in return for every Ranbaxy share. The combined company will have revenue of US$4.2 billion, the Indian firms said in a statement on Monday. Sun Pharma said the equity value of the deal is US$3.2 billion.
Daiichi Sankyo said that after the sale, it will hold 9% stake in Sun Pharma, as well as the right to nominate one director on the company's board.
The Japanese company said the deal will be completed by the end of December, pending approval from Sun Pharma, Ranbaxy and the relevant authorities. Daiichi Sankyo will give details on the impact on earnings as soon as the details of the deal are finalized.
Among the problems that were identified at Ranbaxy were poor sanitary conditions in a laboratory where windows couldn't be shut and there were flies "too numerous to count," FDA said in a January report.
U.S. regulators in January barred the import of drugs from one of Ranbaxy's plants, in Toansa, after investigators said workers there were fudging test results. Drug imports to the U.S. from the other plant have been blocked since 2008.
Sun Pharma has also had its own struggles with the FDA, with imports barred from one of its plants in the state of Gujarat in March. However, the company has said the impact from the ban on its earnings would be negligible.
Sun Pharma has been looking to buy assets at home and abroad and had been talking to banks to meet such ambitions. It has earlier struck more than a dozen deals in India and overseas .
Last year, it made a failed bid for eye-products maker Bausch & Lomb, which was acquired by Canada's Valeant Pharmaceuticals International Inc. VRX.T -3.87% in a $4.5 billion deal.