Reclusive billionaire Dilip Shanghvi, founder of the Mumbai-based Sun Pharmaceuticals, is looking to make the biggest bang in Indian pharma’s history.
The company, according to sources, has entered into an agreement to conduct a due-diligence of Meda AB, a Swedish branded-drugs maker controlled by billionaire Lennart Perlhagen, with the intention of buying it.
Any acquisition will take several months and could cost as much as $6 billion or Rs 34,000 crore, sources said.
If a deal fructifies, it would be the fourth-biggest outbound acquisition by an Indian company after Tata Steel’s purchase of Corus Plc in Britain, Bharti’s buyout of Zain in Africa and Hindalco’s acquisition of Novelis in the US.
Indeed, the taciturn Shanghvi has been on a hot streak having doubled the company’s revenues in under three years and making Sun the No. 1 drugmaker in India with a market capitalisation of $19 billion. In the meanwhile, he also took the reins of Taro, a Israeli generics drugmaker.
But what does Meda bring to the table for Sun?
“Nothing indeed, there are no synergies but it’s a great asset to acquire as it will afford a major presence in the regulated markets of Europe,” said a senior pharma analyst from an international brokerage, who did not wish to be named.
According to its website, Meda is among the world’s top 50 pharma companies with a strong focus on specialty products, branded generics and over-the-counter drugs in the areas of respiratory, dermatology, cardiology, pain and inflammation, none of the areas where Sun has a strong dominance.
Sun largely operates in the generic segments of niche therapy such as psychiatry, neurology, cardiology, nephrology, gastroenterology, orthopaedics and ophthalmology, according to its website.
“Sun also gets presence in not only newer areas but also newer markets as Meda is spread across 55 countries and growing in emerging markets fast,” the analyst said.
Analysts say this is indeed the best time for Sun to make an acquisition as its balance sheet is not only flush with cash of Rs 4,000 crore, debt is also minimal.
The company has also repaid investor faith with its share price rising 84% in the last one year, outperforming the BSE Healthcare index’s growth of 33% and Sensex’s 21%.
On the other hand, Meda, experts suggest, is a good buy at $5 billion because, while it is one-third Sun’s size, revenues are almost equal at $2 billion.
Meda’s current market cap is just over $800 million and has performed poorly in the last calendar year with revenues growing by just 1% and net profit falling by 30% at $174 million.
If Shanghvi succeeds, he would have taken crucial steps to become the third-richest person in India.
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