Ranbaxy and Sun in limelight

The big news today is most obviously the takeover of Ranbaxy Labs by Sun Pharma. The announcement came in today morning and the stocks have reacted accordingly – with Ranbaxy hitting a new 52-week high at Rs. 505 but now it has slipped into the red, down 3% at Rs.446; Sun is currently trading at Rs.588, up almost 3% with an intra day high at Rs.599.

Sun is buying Ranbaxy through an all-share deal with total equity value of $3.2 billion, creating the fifth largest generic company in the world . The market is obviously not happy with the merger – as Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy.

But Sun Pharma has put out a Press Release and stated that this exchange ratio represents an implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30-day volume-weighted average share price and a premium of 24.3% to Ranbaxy’s 60-day volume-weighted average share price, in each case, as of the close of business on April 4, 2014.

Daiichi Sankyo holds 63.4% stake in Ranbaxy and has agreed to vote shares in Ranbaxy in favour of Sun Pharma's acquisition and the transaction is expected to close by December 2014. Post this deal, Daiichi will hold 9% in Sun.