The Rs 478-crore Zydus Cadila Healthcare has signed a memorandum of understanding with Bangalore-based Recon Ltd to acquire its formulations business for Rs 27 crore.
As per the pact, Zydus will acquire 90 per cent in a new company, Recon Healthcare, to which Recon will transfer all its formulation brands along with the marketing and distribution network. The balance stake will rest with Recon's shareholders.
The new company will have an initial turnover of Rs 50 crore --the size of Recon's formulations business-- and a net profit margin of 10 per cent. Recon Healthcare will be merged with Zydus Cadila once the integration process is completed.
"This is an excellent opportunity to consolidate our strengths in the formulations market particularly in the analgesic, anti-inflammatory and cardiovascular segments which are Recon's core areas. The company also has a strong distribution network, especially in the south," said Pankaj Patel, managing director, Zydus Cadila.
Recon also owns brands in the nutritional, anti-biotic, anti-bacterial and anti-ulcerant segments. Its leading brands include Inac and Remulide in the pain management segment, Atenex and Vasonit in cardiovasculars. It also has haematinic Ziferrin TR- a sustained release preparation and anti-ulcerant Lans-OD.
Recon Ltd will retain its manufacturing facility to make products for the new company. The acquisition includes Recon's exports business. The company has nearly 80 products registered in more than 11 countries worldwide, said a Zydus statement.
According to an `all speciality ranking in Continuous Prescription Research' provided by research agency CMARC from November `99 to February `00, Zydus Cadila's ranking will improve from 14 to 5 with the new acquisition.
Its non-steroidal anti-inflammatory ranking as per ORG MAT of March 2000 will improve from 11 to 5 as well.
