Dr Reddy's closes Wockhardt branded generics deal on modified terms

Under new terms, DRL to hold back Rs 300 crore and release it if the revenue from sale of the products forming part of the business undertaking during the 12 months post-closing exceeds Rs 480 cr

2 min read Last Updated : Jun 10 2020 | 5:28 PM IST

Dr Reddy's Laboratories Limited today announced that it has completed the acquisition of select divisions of Wockhardt Limited's branded generics business in India and a few other international territories of Nepal, Bhutan and Maldives. The deal was completed along with certain changes in the original terms of agreement pertaining to the payment consideration.

On February 12, 2020, Dr Reddy's signed a business transfer agreement (BTA) with Wockhardt to acquire the said business undertaking for an upfront consideration of Rs 1,850 crore.

Under the new terms, an amount of Rs 1,483 crore would be paid on the date of closing. An amount of Rs 67 crore would be deposited in an escrow account which shall be released subject to adjustments for, inter alia, net working capital, employee liabilities and certain other contractual and statutory liabilities.

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With regard to the remaining Rs 300 crore, which is being held back, Dr Reddy's will release the money if the revenue from sale of the products forming part of the business undertaking during the 12 months post-closing exceeds Rs 480 crore. Dr Reddy's will be required to pay to Wockhardt an amount equal to two times the amount by which the revenue exceeds Rs 480 crore, subject to the maximum of the holdback amount.

The amendment to the agreed terms were mutually accepted in view of the reduction in the revenue from the sales of the products during March and April, 2020 due to Covid-19 pandemic and subsequent government restrictions, according to the company.

"The deal is in line with our strategic focus on India and has paved a path for accelerated growth and leadership in the domestic market. We believe that the acquired portfolio offers a good growth potential for us. We welcome the employees joining us from Wockhardt to the family of Dr Reddy's," Dr Reddy's co-chairman and managing director G V Prasad said.