Competition Commission of India (CCI) begins public scrutiny of Sun-Ranbaxy deal

In the first-ever public scrutiny of an M&A deal in India, fair trade watchdog Competition Commission of India (CCI) on Thursday invited comments from all stakeholders, including general public, on finer details of $ 4-billion merger of Ranbaxy Labs into rival drugmaker Sun Pharmaceuticals.

The comments need to be submitted to the CCI within 15 days, along with supporting documents on how the merger can adversely impact the concerned person or entity, the regulator said, while adding that it would not consider ‘unsubstantiated objections’ to the deal.

The CCI said the public consultation process has been launched “in order to determine whether the combination has or is likely to have an appreciable adverse effect on competition in the relevant market in India”.

Widening its scrutiny of the multi-billion dollar deal, CCI had asked the two pharma majors on August 27 to make public specific details of their proposed merger.

This is the first instance where the CCI has ordered a public scrutiny of a proposed merger and acquisition (M&A) deal to ensure compliance to fair trade regulations.

Sun Pharma and Ranbaxy, which had announced a $ 4-billion deal in April this year, were asked to make public details of their proposed transaction in a “prescribed format”, which has been now put in public domain for “comments/objections/suggestions” from any person adversely affected or likely to be affected by the combination.

CCI Chairman Ashok Chawla also said on August 29 that major issue in the deal is whether the combination would result in high market concentration of certain molecules.

“The major issues obviously are that in many of the molecules, the basic building block in the pharmaceutical industry, whether in some of those molecules there is high market concentration which will emerge as a result (of the consolidation). That is the matter,” Mr. Chawla said.

The $ 4-billion deal would create the fifth largest speciality generics company in the world and the largest pharmaceutical company in India.

The combined entity would have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of speciality and generic products marketed globally.

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

The deal has got ‘no-objection’ from the two exchanges, BSE and NSE, where the shares of two firms are listed, allowing them to file their scheme of amalgamation with the High Court for further clearance of the deal.