Strides cuts dividend in Agila sale to Mylan

Strides Arcolab on Tuesday reduced the dividend for the $1.75-billion sale of its Agila Specialties division to US’ Mylan to $525 million (before tax) from $700-$800 million. A shareholder will now get Rs 500 an equity share.

A warning letter from the US Food and Drug Administration (FDA) to one of Agila’s  injectibles unit in Bangalore forced the company to cut the dividend.

“We expect to incur $150 million as along with Mylan we have agreed to bring in third-party consultants to oversee remediation actions at the manufacturing plant (for which FDA has issued a warning letter). In addition, we will be incurring an additional cost to acquire certain assets related to a B2B (business-to-business) partnership in the US to mitigate loss of certain revenues consequent to the letter,” Strides said.

In February, Strides had announced sale of Agila to Mylan for $1.75 billion, making it the third largest acquisition in the country’s pharmaceutical sector.  Later, the deal got delayed as FDA first issued a Form 483 (which raises concerns after inspections) and then, a warning letter. Consequently, Mylan had said it would hold $250 million from the $1.75 billion.