Sun Pharma shares soar 4% on Ranbaxy deal

NDTV Profit Desk

07 Apr 2014, 12:56 PM IST

Sun Pharma shares gained as much as 4 per cent after the Mumbai-based drug maker announced a $3.2 billion all-stock deal to buy Ranbaxy. Sun Pharma was the top gainer on the 50-share Nifty benchmark in opening trade. (Read the full story here)

Ranbaxy, however, dropped as much as 5.5 per cent on profit taking. Ranbaxy shares have gained 26 per cent over the last week as compared to a 0.12 per cent drop in the BSE Sensex. (Track stock)

Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy. The exchange ratio represents an implied value of Rs 457 for each Ranbaxy share.

Daiichi Sankyo, which bought Ranbaxy in 2008, will hold about 9 per cent stake in Sun Pharma after the deal.

Deven Choksey told NDTV that the deal is a win-win situation for Sun Pharma and Ranbaxy. The ANDA (abbreviated new drug application) pipeline of Ranbaxy is inspiring and given the ground reach of Ranbaxy, the combination will work in the generic business, he added.

"The track record of Sun Pharma, as far as acquisitions are concerned, has been good. Whenever they have acquired a company, they have been successful in turning it around," he said.

As of 12.52 p.m., Sun Pharma traded 1.3 per cent higher at Rs 579.35, while Ranbaxy traded 4.7 per cent lower at Rs 438 on the NSE. The broader Nifty was down 0.45 per cent. (Track stock)

Brokerages on Sun Pharma-Ranbaxy deal:

As per Motilal Oswal estimates, the combined entity will generate a revenue of Rs 36,126 crore, EBITDA of Rs 11,591 and net profit of Rs 6,962 crore in FY16. Fair value of Sun Pharma shares are Rs 520-580. Sun Pharma will get access to strengthen its Indian business post this deal, said Motilal Oswal.

Macquarie says this transaction won't lead to dilution of earning for Sun Pharma. The valuation at which the deal has happened is very attractive so Sun Pharma will sustain its premium valuation, it added.

Nomura says organic growth would have been difficult for Sun Pharma, it choose the inorganic route. Ranbaxy will be the next growth engine for Sun Pharma, it added.