Solara Active Pharma extends gains, rallies 12% on merger with Aurore Life

Solara Active and Aurore Life Sciences' amalgamation would create one of the largest API players in the industry

Shares of Solara Active Pharma moved higher by 12 per cent to Rs 1,529 on the BSE in the intra-day trade on Monday after the company said it has approved the amalgamation with Aurore Life Sciences (Aurore), Empyrean and Hydra in an all-stock transaction. The stock was trading higher for the fourth straight day, and has rallied 16 per cent during the period. It hit a 52-week high of Rs 1,625 on February 12.

Solara is engaged in the business of manufacturing and development of Active Pharmaceutical Ingredients (API) and also offers Contract Manufacturing and Development Services (CMDS) to the global companies. Aurore Life Science, meanwhile, is engaged in the business of developing wide range of generic pharmaceutical products.

The shareholders of  Aurore and Hydra Active Pharma Sciences (transferor companies) shall be issued 13.29 million equity shares of Solara. Pursuant to which, the shareholders of the transferor companies would have 27 per cent stake in Solara.

Additionally, with this merger, Aurore, Empyrean Lifesciences and Hydra Active Pharma Sciences shall be merged into Solara and post-merger, Solara will hold 67 per cent stake in Aurore. The appointed date for the merger would be 1st April, 2021 and the merger process is expected to be completed in March 2022 quarter (Q4FY22).

Solara said the amalgamation will enable the consolidation of the API business and would create one of the largest API players in the industry and will facilitate in focused growth, operational efficiency, integration synergies and better supervision of the business.

"The amalgamation would enable to enhance business potential and increased capability to offer a wider portfolio of products with a diversified resource base and deeper client relationships. It will significantly de-risk operations with the combined entity having eight manufacturing facilities, three Research & Development Centers and footprint in over 75 countries enabling a wider market reach and customer offerings," the company said in a statement.

The transaction is immediately EPS accretive to Solara’s shareholders. The transaction will deliver 100 per cent of Aurore which owns all the IP and 100 per cent revenues and EBITDA of the group, 100 per cent stake of Empyrean Lifesciences and 67 per cent stake of Aurore. Solara and Aurore combine to create second largest pure play API / CRAMs Company in India.

At 11:53 am, Solara was trading 9 per cent higher at Rs 1,491 on the BSE, as compared to a 3.2 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 667,000 equity shares having changed hands on the NSE and BSE till the time of writing of this report.