India’s Sun Pharma to buy struggling Ranbaxy for $3.2 billion

TOKYO/MUMBAI,  Apr 7 (Reuters):  India's Sun Pharmaceutical Industries Ltd  has agreed to buy generic drugmaker Ranbaxy Laboratories Ltd  for $3.2 billion, betting it can fix factory quality glitches that plagued the current owner, Japan's Daiichi Sankyo Co, and got Ranbaxy India-made drugs barred from the United States.
The all-share transaction, the biggest pharmaceutical sector deal in the Asia-Pacific region this year, will create the world's fifth-largest maker of generic drugs. The acquisition comes as the pace of consolidation increases in a market primed for growth in the US and emerging markets that could be worth $335 billion globally by 2017, according to Lucintel.
For Daiichi Sankyo, the deal marks a significant retreat and highlights the lingering quality problems facing India's drug industry. The value of the Japanese firm's investments in the country has been halved since it bought control of Ranbaxy in 2008.
For Sun Pharma, the relatively rare purchase by a leading Indian company of a local rival creates the biggest generic drug business by sales in India, with combined revenue estimated at $4.2 billion. Under terms of the agreed deal, Ranbaxy shareholders will get 0.8 of a Sun Pharma share for each Ranbaxy share they own.
"This transaction helps us transition to our long-held ambition of becoming a successful Indian company in the global pharmaceutical space," Dilip Shanghvi, managing director of Sun Pharma, India's largest drugmaker by market value, said in a conference call with analysts. Including Ranbaxy debt, the overall value of the transaction is $4 billion.
The deal comes against the backdrop of a slew of sanctions against Ranbaxy by the US Food and Drug Administration (FDA) due to concerns about manufacturing processes at its India plants.