Pfizer makes open offer to raise stake in Indian unit

But the offer price is lower than Monday's closing price.

The world’s biggest drug maker Pfizer Inc has offered about Rs 680 crore to raise its stake in its Indian subsidiary to 75 per cent from 41 per cent. The offer of Rs 675 per share, however, is unlikely to find takers, since Pfizer share price rose 10.02 per cent to close at Rs 685.4 per share on the Bombay Stock Exchange (BSE) today, analysts feel.

Pfizer is the first multinational drug company after Switzerland's Novartis to announce plans for a substantial stake increase in the Indian subsidiary in the past month. The growing interest among foreign pharmaceutical multinationals (MNCs) to increase their stakes in their Indian subsidiaries saw the share prices of publicly listed arms of foreign drug MNCs like GlaxoSmithkline (3 per cent), Aventis (5 per cent), and Wyeth (5 per cent) rise on the stock exchange today.

The Pfizer offer represents a premium of more than 8 per cent to Pfizer India's April 9 closing price. Novartis had offered a 23 per cent premium over the share price to acquire over 90 per cent in its Indian arm. Novartis had announced plans to invest about Rs 440 crore by offering Rs 351 for each share. Like Pfizer, Novartis shares are also traded at a price higher than the offer price in the open market (Rs 369.95).

The Novartis offer is likely to open next month, Pfizer said it expects to have the open offer in June.

“Both companies will have to revise their offer prices if they want investors to tender their shares in the public offer. Pfizer’s decision to offer an 8 per cent premium is not at all attractive and the market prices have risen above the offer price on the same day,” said Ranjit Kapadia, a Mumbai-based industry analyst.

Pfizer said the open offer price represents a premium of 22.3 per cent over Pfizer Ltd’s average share price during the 30 days ending April 9 on the BSE.

Industry analysts feel that the open offer is the first step towards de-listing the Indian subsidiaries for both the companies. “De-listing is the long term plan for multinational drug firms, as they function through wholly owned subsidiaries in most of the geographies world wide,” they say.

Several MNC drug companies operating in India have de-listed their entities from the market in the past. 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 its amalgamation with Strides Arcolab.