Ranbaxy, Sun Pharma jump on buzz court lifts merger stay

Ranbaxy Laboratories and Sun Pharmaceuticals Industries rose by 1.86% to 2.64% at 10:08 IST on BSE on reports the Andhra Pradesh high court on Saturday, 24 May 2014, lifted a temporary stay it imposed on the merger of both the companies.

Ranbaxy Laboratories (up 2.64%) and Sun Pharmaceuticals Industries (Sun Pharma) (up 1.86%), edged higher.

The S&P BSE Sensex was up 311.66 points, or 1.26% at 25,005.01.

Shares of Ranbaxy Laboratories (Ranbaxy) had underperformed the market over the past one month till 23 May 2014, falling 7.01% compared with 7.94% rise in the Sensex. The scrip had, however, outperformed the market in past one quarter, rising 23.75% as against Sensex’s 19.29% rise.

Shares of Sun Pharmaceuticals Industries (Sun Pharma) had underperformed the market over the past one month till 23 May 2014, sliding 6.61% compared with 7.94% rise in the Sensex. The scrip had also underperformed the market in past one quarter, falling 4.82% as against Sensex’s 19.29% rise.

According to reports, the Andhra Pradesh high court on Friday, 23 May 2014, reserved its order on an appeal by Sun Pharma challenging a stay and status quo ordered by it on the proposed merger between the drugmaker and Ranbaxy. Justice G.Chandraiah reserved the order for Saturday, 24 May 2014.

Sun Pharma and Ranbaxy lawyers said in court that the insider trading allegations on which the court based its order and the proposed merger are two different issues and the merger process should be allowed to continue, reports suggested.

On 7 April 2014, Sun Pharma and Ranbaxy announced entering into definitive agreements pursuant to which Sun Pharma will acquire 100% of Ranbaxy in an all-stock transaction. Under these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy.

The combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world and the largest pharmaceutical company in India. The combined entity will have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of specialty and generic products marketed globally, including 629 ANDAs. On a pro forma basis, the combined entity’s revenues are estimated at $4.2 billion with EBITDA of $1.2 billion for the twelve month period ended December 31, 2013. The transaction value implies a revenue multiple of 2.2 based on 12 months ended 31 December 2013.