Sun Pharma, Ranbaxy to sell 7 products to meet CCI conditions

Sun Pharma, Ranbaxy to sell 7 products to meet CCI conditions

Asked by CCI to divest seven products, drug makers Sun Pharmaceutical and Ranbaxy today said they will comply with the conditions put forth by the fair trade regulator to take forward their proposed merger.

While approving their USD 4-billion merger, Competition Commission of India (CCI) has asked the two companies to divest seven products to address anti-competitive concerns.
"Sun Pharma and Ranbaxy are looking forward to progressing towards the completion of the transaction and will comply with the conditions laid down by the CCI within the specified time," the two firms said in a joint statement.

They also added that these products constitute less than one per cent of the combined entity's revenues in India. The divestment needs to be finalised within six months.

The two companies announced their merger in April this year and the merged entity is expected to be India's largest and the world's fifth largest drug maker with combined revenue of USD 4.2 billion.

In their joint statement, the two firms said they have received the CCI order where acquisition of Ranbaxy by Sun Pharma has been approved "subject to compliance with certain conditions".

"Over the past few months, the CCI has sought information and detailed clarifications for the purposes of making its assessment. One of the preconditions of the order is that parties procure the divestment of seven products," they added.

Terming the CCI approval as a major milestone for the deal, Sun Pharma MD Dilip Shanghvi said: "It revalidates our view that the Sun Pharma and Ranbaxy businesses complement each other with limited product overlap, and will offer a comprehensive product basket to enable future growth.

Ranbaxy CEO Arun Sawhney said, "We are confident that post closure, the combined entity will enable sustainable long term growth and deliver immense value for all stakeholders."
Established in 1983, Sun Pharmaceutical Industries has emerged as a major speciality pharmaceutical company with over 75 per cent sales from global markets, while it has expanded its business mostly through acquisitions.

For the year ending March 2014, its overall revenues were at USD 2.7 billion, of which the US contributed USD 1.6 billion. Ranbaxy was also a home-grown company, but its then promoters, Malvinder Mohan Singh and Shivinder Mohan Singh, sold the majority stake in the company to Japan's Daiichi Sankyo in 2008. In April this year, Ranbaxy reached a deal for its merger with Sun Pharma.

Ranbaxy has been going through frequent regulatory run-ins with overseas health watchdogs including in the US and Europe.  CCI Chairman Ashok Chawla later said this was the Commission's final order in the case and it was likely to appoint the monitoring agency in the next few days to oversee compliance to the directions.

As per the order, Sun Pharma and Ranbaxy have six months to divest or procure the divestiture of divestment products. "The divestiture shall not be given effect to unless and until the Commission has approved the terms of final and binding sale and purchase agreement(s) and the purchaser(s) proposed by the parties," the order said.

"The proposed combination shall not be effected by the parties until approved sale and purchase agreement(s) have been entered into in accordance with the order," it added.
CCI also asked the two firms to give full information regarding divestment products to potential purchasers so as to enable them to undertake reasonable due diligence.

"The parties may require the potential purchasers to execute a confidentiality agreement before providing access to information regarding the divestment product(s)," CCI said.
Further, CCI would appoint a monitoring agency to "monitor the due diligence process, including the preparation of data room documentation, in accordance with the monitoring agency agreement".

Sun and Ranbaxy are each required to appoint a senior management level employee within seven days who would under the supervision of the monitoring agency ensure that the economic viability, marketability and competitiveness of the divestment products are maintained till the closing date.

As per the Commission's order divestment would not include any manufacturing facilities of the two companies, intellectual property rights which do not contribute to the current operations as well as general books of account and books of original entry that comprise the parties permanent accounting or tax records.

In April, Sun Pharmaceutical Industries announced it would acquire troubled rival Ranbaxy Laboratories in a USD 4-billion deal that includes USD 800 million debt. The transaction has valued Ranbaxy at 2.2 times its USD 1.8 billion revenue for 2013, or about Rs 457 per share.

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