Sun-Ranbaxy Merger: CCI approves divestment of seven brands to Emcure

The all-share deal, the largest in the Asia-Pacific region's pharmaceutical sector, announced last year, is seen as a rare purchase of a local rival by a leading Indian company

The Competition Commission of India (CCI) has given its approval to divest seven brands by Sun Pharmaceutical Industries and Ranbaxy Laboratories to Pune-based Emcure Pharmaceuticals. With this, Sun Pharma and Ranbaxy have reached the finishing line for the proposed $4-billion merger deal. The value at which these brands have been sold has not been disclosed. But earlier, Sun officials and analysts had said the combined value of these seven brands would be over Rs 50 crore, a minor number given the company’s scale of business. Usually, in case of such divestment, two to three times of the brand value is paid to the seller, pointed out analysts.

CCI had asked Sun Pharma to divest all products containing tamsulosin and tolterodine, currently marketed and supplied under the Tamlet brand, while Ranbaxy was asked to divest the brands such as Terlibax, Rosuvas EZ, Raciper L, Terlibax, Triolvance and Olanex.

CCI has said it found Emcure  as “a company active in the sales and marketing of pharmaceutical products in India and has the financial resources, proven expertise, manufacturing capability or ability to outsource manufacturing and incentive to maintain and develop the divestment products, as a viable and active competitor to the parties in the relevant market”. Thus, CCI has approved Emcure as the approved purchaser of the divestment products.

Recently, the Punjab and Haryana High Court gave its go-ahead to the merger of Sun Pharma and Ranbaxy. Now, with the nod from CCI in pocket, the Sun will emerge as fifth biggest generic pharma company in the world. Earlier, on January 31, the US FTC (Federal Trade Commission) cleared the merger which was preceded was CCI conditional nod to the merger, asking both companies to divest seven drug assets in India. The process, it is learnt, was dealt with PwC India the consultant for it.

Emcure caters to areas such as cardiology, pain and analgesics, HIV, nephrology, vitamin and nutrient products, etc. It also exports is drugs to 65 countries, including the US, Brazil, South Africa and Dubai.

With all the required approvals, brand Sun is ready to take charge over Ranbaxy as the latter would fade away in India, at least for the moment. However, the sub-brands of the company like Volini and Revital will continue as they are, according to company officials. Some of the markets globally may retain brand Ranbaxy for some time, Sun CFO Uday Baldota had recently told BS in an interview.

The all-share deal, the largest in the Asia-Pacific region’s pharmaceutical sector, announced last year, is seen as a rare purchase of a local rival by a leading Indian company. The buyout is valued at $3.2 billion. As Sun Pharma will also take Ranbaxy’s debt of about $800 million on its books, the overall transaction value comes to $4 billion.

Under the terms of the deal, Ranbaxy shareholders will get 0.8 Sun Pharma share for each Ranbaxy share held. The deal values Ranbaxy shares at Rs 457 apiece, a premium of 18 per cent to the 30-day volume-weighted average share price.

In 2008, Japan’s Daiichi Sankyo had acquired a 63.9 per cent stake in Ranbaxy for $4.2 billion. But the value of its investment has halved since, as Daiichi hasn’t been able to ensure compliance with norms at Ranbaxy’s factories supplying drugs to the US.