Strides slips into the red
Strides Arcolab is deep in the red today morning. The stock which has closed yesterday at Rs.986, opened higher today at Rs.1043 and went on to hit an intra day high at Rs.1050 but since then, has slipped down over 12% into the red, going down as low as Rs.845.50. Volumes are up almost 3.5 times.
The stock opened in the positive on news that it has finally completed the sale of Agila Specialties to Nasdaq-listed Mylan Inc for a total consideration of upto $1.75 billion. But reading into the statement by the company indicates some ruffled feathers in this sale.
This sale was done in Feb’13 and was expected to be completed before end of FY14. But soon after this, the company got a warning letter from US FDA for violation of manufacturing norms at its sterile making facility 2 (SFF) in Bangalore. Post this warning, the company has stated that it has agreed to a hold back of $250 million, which will be contingent upon satisfaction of certain regulatory conditions related to the injectable facilities in India. The company expects those contingent conditions will be satisfied sometime in 2014. The company added that since the initial announcement of this transaction, Strides now expects an additional expenditure of $150 million. This includes cost towards acquisition of additional assets from its erstwhile partners and an estimated remediation cost related to its regulatory commitments post the warning letter.
The market was more perturbed by this and even the promise of a “special dividend” scheduled to be announced on 10th Dec during the Board meeting failed to enthuse the investors.