Ranbaxy Labs to set up SPV for Merck Generics bid

Ranbaxy Laboratories is considering using the frequently-employed technique of taking the special purpose vehicle (SPV) route for launching a bid on Merck’s generic business. If Ranbaxy decides to take the SPV route, the debt and private equity funds as well as Ranbaxy’s own funds will be infused into the SPV.

Merck is looking to sell its generics division, in a deal that could be valued at $5.2 bn. The generics business clocks revenues of around $2.5 bn and if Ranbaxy is able to acquire it, the Indian company’s revenues could nearly triple to around $3.8 bn (See Related Post). The bidding process and due diligence are expected to begin in February. Leading generic companies such as Teva and Sandoz and private equity majors such as Blackstone and KKR could be in the race as well. Ranbaxy has in the past secured shareholders approval to raise $1.5 bn out of which it has already raised $440 mn through FCCBs. Ranbaxy has also taken a 14.9% stake in Hyderabad-based Krebs Biochemicals and Industries for around Rs. 9 crores (See Related Post).

Read the article in The Economic Times.

Ranbaxy Laboratories to bid for Merck’s generic drug business

Ranbaxy Laboratories, India’s third-largest drug maker by market value, is planning to buy German pharma major Merck’s generic drug business, estimated to be worth more than €4 bn ($5.2 bn). If a deal is struck, Ranbaxy will become the third largest generic drug manufacturer in the world, behind Teva Pharmaceuticals of Israel and Swiss pharma company Novartis, with combined sales of $4 bn. Ranbaxy itself is valued at $3.5 bn, and aims to be one of the top five generic players in the world with $5 bn in annual sales by 2012.

Ranbaxy would likely be competing with other pharma companies such as Teva, Sandoz (Novartis’ generics division) and Sanofi-Aventis as well as private equity majors such as Blackstone and KKR, for acquiring the assets of Merck’s generic business. Ranbaxy hopes to be in the fray by January-end. The company is planning to raise finances for the acquisition through a mix of debt, equity and private equity.

In the year 2006, Ranbaxy laboratories had made six acquisitions – Be-Labs (South Africa), Ethimed NV (Belgium), Terapia (Romania) and the unbranded generic business of GlaxoSmithKline (GSK) in Germany and the Mundogen generic business of GSK in Spain.

Merck’s generics business has gross revenues of around $2.5 bn. The German company had announced last week that it was considering the sale of its generics division (Merck Generics) to raise resources for the acquisition of Swiss drug-maker Serono. Merck Generics has sales in more than 90 countries and accounts for the third largest generics business in the world. The division employs approximately 5,000 people world-wide.

A successful acquisition, besides tripling Ranbaxy’s topline, will give it greater access to key markets in the US, Europe and Japan. Moreover, with the Merck business not being vertically integrated, Ranbaxy can use its strengths in the active pharmaceutical ingredient (API) business to bring about greater cost synergies and efficiencies. It will also result in improved product flow, economies of scale and relative enhanced pricing power for Ranbaxy in the highly competitive generic industry.

Read more on this news from Reuters.com, Business Standard and The Economic Times – 1 2.