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| Novartis offer unlikely to enthuse market |
| BS Reporter / Mumbai Mar 26, 2009, 00:59 IST |
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Switzerland-based Novartis AG’s move to buy an additional 39 per cent stake in its Indian arm, Novartis India, is unlikely to get much response from investors, considering the latter’s valuations and growth prospects, feel analysts.
Novartis planned to invest about Rs 440 crore to raise its stake, by offering Rs 351 for each share, the company said in a statement to the stock exchanges today.
Analysts felt the offer price should have been around Rs 450 per share. “Novartis India has a turnover of Rs 560 crore and has cash and liquid assets worth Rs 475 crore, which makes it a company having a minimum valuation of more than Rs 1,000 crore. It also has some of the largest selling brands in the domestic market, like painkiller drug Voveran,” said Ranjit Kapadia, head of research at Prabhudas Liladhar.
“The offer price represents a substantial premium, which compares favourably with past open offers’ premium and valuation multiples for comparable companies. For these reasons, we believe our offer is attractive and do not see any ground for a price revision,” Novartis International AG’s spokesman, Eric Althoff, replied in an e-mailed statement.
Sources with Merryl Lynch, which represents Novartis AG for this transaction, said the open offer might commence in May, following statutory clearances. The open offer price of Rs 351 per share is a premium of 35 per cent over Novartis India’s average share price during the past month.
At present, Novartis AG has three privately owned companies in India — generic company Sandoz Pvt Ltd, Novartis Healthcare Pvt Ltd and Chiron Behring Vaccines Pvt Ltd. Many multinational companies which operate in India through publicly listed companies also operate separate private subsidiaries to sell their global products here.
For instance, while Merck Ltd is a listed entity, Merck & Co also operate the privately-held Merck Specialties in India. Similarly, Wyeth has another privately held company, named Wyeth Pharmaceuticals.
Historically, many multinational drug companies operating in India have de-listed their entities from the market. Two major drug players in India, Parke Davis and Pharmacia Healthcare, delisted from Indian stock exchanges following their merger with Pfizer, in 2004 and 2005, respectively.
Burroughs Welcome (India) was delisted in 2005 following its merger with UK-based Glaxo Smithkline Pharmaceuticals. SmithKline Beecham Pharmaceuticals (India) was de-listed in 2002 following its merger with Glaxo India as part of the Glaxo-SmithKline global merger.
Among the domestic majors, American Remedies was delisted following its acquisition by Dr Reddy’s Laboratories and Bombay Drug and Pharma was delisted following amalgamation with Strides Arcolab.
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