Merger of Ranbaxy with Sun Pharma

On Monday, Sun Pharmaceutical Industries Ltd said it will buy Ranbaxy Laboratories Ltd  in a $3.2 billion, taking Ranbaxy's debt into account; the transaction is worth over USD 4 billion. Thus, creating the world's fifth-largest generic drug maker from two firms struggling with quality issues in the lucrative United States market

Highlights of the deal

• The merger will see Sun Pharma’s revenues jump by a healthy 40% but its operating profit will rise by mere 7.5%, based on pro forma 2013 financials. Its operating profit margin will decline from 44.1% to 29.2%. Thus, the merger will have a negative effect on its performance in the near term.
• Every Ranbaxy Laboratories shareholder will receive 0.8 shares of Sun Pharma. This is because Sun Pharma is bigger than Ranbaxy Laboratories in terms of sales, profits and stock market value. The market cap of Sun Pharma is Rs 1,22,000 crore, while that of Ranbaxy Laboratories is just over Rs 18,800 crore.
• Daiichi Sankyo, the Japanese owner of India's biggest drug maker by sales, will hold a stake of about 9 percent in Sun Pharmaceutical after the deal.
• The combined entity becomes the biggest pharma company in India and  there will be no company by the name Ranbaxy Laboratories, it will be Sun Pharma only
• 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.
•  India’s government, high courts, competition commission all need to approve the merger. Besides this, 75% of shareholders of both Ranbaxy and Sun Pharma have to approve the merger and the ratio.
• According to Sun Pharma the process is expected to complete by December 2014