After high court nod, the deal is expected to close soon; shares of both companies end in green on the day Sensex fell 600 points
The High Court of Punjab & Haryana has approved the $4 billion merger of Ranbaxy Laboratories with Sun Pharmaceutical Industries, clearing the last hurdle in creating the fifth largest generic company globally by sales.
Post announcement, Sun Pharma closed up 0.41% at Rs 1,041.65 a share and Ranbaxy 1.27% at Rs 815.90 a share on Monday over previous close. Despite Sensex falling over 600 points, or 2.09%, most pharma stocks were in green with a marginal increase in their share prices. The healthcare index too closed up 0.30%.
A statement issued by both Sun and Ranbaxy on BSE, said that the High Court of Punjab & Haryana on March 9, 2015 orally pronounced an order, approving the scheme of arrangement involving merger of Ranbaxy Laboratories with Sun Pharmaceutical Industries under Sections 391 to 394, Sections 78 and 100 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013.
The statement said the certified true copy of the said order is being awaited.
In January this year, the US Federal Trade Commission (FTC) gave its nod for the merger. Last December, the fair trade watchdog Competition Commission of India (CCI) had approved the merger with a rider that the two companies will have to hive off seven brands as it may have an adverse effect on competition in India.
Under the deal, Sun will acquire 100% of Ranbaxy in an all-stock transaction worth $4 billion including Ranbaxy's debt of around $800 million. Under the deal terms, 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% to the 30-day volume-weighted average share price, and a premium of 24.3% to Ranbaxy's 60-day volume weighted average share price, as on April 4, 2014.
According to a pharma analysts, both Sun and Ranbaxy shares are up only marginally. “Most pharma stocks have gained despite the market being down 600 points. That's because pharma stocks are defensive and are a safe haven. This stocks give steady return, so investors looking with a long-term outlook prefer such stocks,” said a pharma analyst, adding that the physical order of approval from the court should come in the next few days, with the closure of the deal now expected soon.
Pharma analyst Hitesh Mahida of Antique Stock Broking, said, “The pharma stocks are largely defensive stocks. No other reason for marginal increase in stock prices of pharma companies. However, there is a positive sentiment regarding pharma stocks, which is another reason for them to be in green.”
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