Swedish drugmaker Meda says not in sale talks

By Simon Johnson

STOCKHOLM (Reuters) - Swedish drugmaker Meda said on Wednesday it was not in talks on a takeover, a week after sources said India's Sun Pharmaceutical Industries was looking to buy the company and had approached banks for financing.

One source said a deal hit trouble over the value of Meda, which makes specialty products, over the counter drugs and branded generics - the same areas of focus as Sun Pharma - and has a market capitalisation of about $4 billion.

There has been a string of deals involving drug companies, including a planned $5 billion purchase of Warner Chilcott Plc by Actavis Inc and Valeant Pharmaceuticals International Inc's $8.7 billion tie-up with Bausch & Lomb.

Two sources with direct knowledge of the situation told Reuters on May 31 that Sun Pharma was prepared to pay between $5 billion and $6 billion for Meda to boost its generics business in developed markets.

"Due to the recent speculation in the press and news media concerning Meda merging with another pharmaceutical company, we have decided to inform the market that there are currently no such discussions," Meda said in a statement.

The company declined to comment further.

Meda shares were down almost 5 percent by 0800 GMT, while Sun rose 2 percent.

Sources familiar with the talks said several banks had offered Sun funding to buy Meda, but one said a deal ran into problems due to "some fundamental issues" over valuation.

A deal would hinge on the position of Sweden's Olsson family, which owns more than 22 percent of the group.

Meda had sales of about 13 billion crowns in 2012. Mumbai-based Sun is India's most valuable drugmaker, with a market capitalisation of some $20 billion, and has made several acquisitions in recent years.

Buying Meda would give Sun access to Dymista, an allergy medicine that received U.S. approval last year and is viewed by analysts as having good potential.

The inhaler product is manufactured and supplied to Meda by Cipla Ltd , an Indian rival of Sun.

Other Meda drugs have not performed so strongly in recent times, however, and its core earnings, or EBITDA, fell 16 percent last year. Analysts expect core earnings to be flat in 2013, making its enterprise value of around 10 times EBITDA relatively expensive, according to one banker.

Last year, Sun bought U.S.-based Dusa Pharmaceuticals Inc for about $230 million, as well as URL Pharma from Japan's Takeda Pharmaceutical Co for an undisclosed amount.

It also sought to buy out minority shareholders in its U.S.-listed Israeli subsidiary Taro Pharmaceutical Industries for $571 million before withdrawing the proposal earlier this year.

(Additional reporting by Patrick Lannin in Stockholm and Sumeet Chatterjee in Mumbai; editing by Tom Pfeiffer)