Strides Arcolab looks to sell stake worth Rs 4,885 cr

The Bangalore-based pharma company is in talks with Japan’s Otsuka Holdings

Strides Arcolab, the Bangalore-based publicly-held pharmaceutical company, is understood to be in talks with Japan-based $12-billion Otsuka Holdings to sell Agila Specialties, its specialties division.

Industry watchers estimate the deal at about $900 million. The amount is much lower than $2 billion, Agila’s valuation according to recent reports.

Otsuka Holdings is a diversified conglomerate present across the pharmaceuticals, nutraceuticals, consumer products, chemicals and electronic equipment.

Global pharmaceuticals majors, including Pfizer and Mylan, have been interested in Strides Arcolab’s specialties business, which reported strong operating margins. In 2010, Agila Specialties was carved out as a wholly-owned subsidiary. It contributes about 40 per cent to the company’s revenue of Rs 3,000 crore and 52 per cent to the company’s operating margins.

Earlier, the company’s discussions with Pfizer had hit a roadblock.

Investment bankers close to Strides Arcolab indicate the company’s focus aligns with Agila’s product range. Agila Specialties has strong partnerships with a clutch of global pharmaceutical majors, including Pfizer, GSK, Sandoz, Teva, Novartis, Aspen, Martindale, Sagent and Actavis.

If the transaction with Otsuka Holdings materialises, it would be the group’s second major transaction in India. Earlier, Otsuka Pharmaceutical Factory, a subsidiary of Otsuka Holdings, had signed a joint venture with Ahmedabad-based Claris Lifesciences, along with Mitsui, for specialised IV solutions in a deal worth about Rs 1,300 crore.

While Strides said it wouldn’t comment on market speculation, Otsuka Holdings couldn’t be reached for comments. In an earlier statement, Otsuka Pharmaceutical Factory had said the group had identified India as a priority country for foreign acquisitions.