Shares in Sun Pharma rallied following the acquisition of Ranbaxy Labs. The stock was last trading higher by 3 per cent on the National Stock Exchange, while shares in Ranbaxy fell.
Sun Pharma was trading at Rs 588, while Ranbaxy was down 2.88 per cent at Rs 448.
On Monday, Sun Pharma said that they will acquire Ranbaxy Laboratories in an all stock deal which will create India's largest pharma company and the world's 5th largest specialty generic pharma company.
Under the agreement, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. This exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy's 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy's 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014
The proposed transaction has been unanimously approved by the Boards of Directors of SunPharma, Ranbaxy, and Ranbaxy's controlling shareholder, Daiichi Sankyo. Ranbaxy's board and Sun Pharma's board have recommended approval of the transaction to their respective shareholders.
"The acquisition is expected to be accretive to Sun Pharma's cash earnings per share in the first full year. Additionally, Ranbaxy's shareholders will participate in the value creation of the combined company through their ownership of Sun Pharma shares. Sun Pharma expects to realize revenue and operating synergies of US$ 250 million by third year post closing of the transaction. These synergies are expected to result primarily from topline growth, efficient procurement and supply chain efficiencies. As part of the transaction, Sun Pharma intends to leverage the human capital that has supported both companies, in order to drive future growth," Sun Pharma has said in a release.