3:7 Ratio For Ranbaxy-Croslands Merger

Croslands Research shareholders will get three shares of Ranbaxy for every seven shares they hold in the company.

The swap ratio of 3:7 was decided at separate board meetings held yesterday in Mumbai and Delhi by the two companies.

The companies had informed the Bombay Stock Exchange last week of their decision to merge and had fixed yesterday as the date for the board meeting.

The merger will come into force with effect from April 1, 1996.

The two companies will also swap some of their board members. Two Croslands directors will join the board of Ranbaxy, while two Ranbaxy directors will become Croslands board members.

This arrangement will stay in place till the Mumbai and Delhi high courts approve the merger. The two Croslands directors on the Ranbaxy board will be G K Ramamurthy and V Shankar.

Croslands will exist as a separate profit centre within the Ranbaxy fold.

The swap ratio was fixed by two independent valuers: Walker Chandiok & Company and S S Khandelwal & Company.

The odd lot of shares left post-conversion will either be sold to a trust created for the purpose or to a financial institution, possibly the Industrial Development Bank of India, under the terms of the listing agreement.

The Ranbaxy scrip witnessed steady trading at the Bombay Stock Exchange yesterday.

It opened at Rs 605, touched a high of Rs 608 and a low of Rs 600

efore closing at Rs 605. On the National Stock Exchange, the scrip fell from Rs 610 to Rs 600.

Croslands, on the other hand, rose from Rs 246 to Rs 253 on the BSE, while on the NSE, it rose marginally from Rs 245 to Rs 247.5.

Analysts said Ranbaxy will gain in the domestic market due to the merger.

"It had lost its domestic focus, allowing Cipla to rise to the number two slot. With this, Ranbaxy will regain its position and focus more on the domestic market," says Sapna Malhotra, pharma analyst at SSKI Securities.

Ranbaxy is expected to gain in other ways too: expansion of therapeutic range and increase in domestic share to 5.3 per cent from 4.6 per cent.

The share capital of Croslands will meanwhile expand to incorporate the shares arising from the conversion of 1,10,000 warrants into 2,20,000 equity shares. Each warrant was to be converted into one equity share of Rs 10 at a premium of Rs 357 by the end of February 1997.

The company had recently issued bonus shares in the ratio of 1:1. Thus

the promoters who held the warrants will be effectively having 2,20,000 shares.