Andhra HC stays Sun Pharma-Ranbaxy deal till insider trading verdict

The Andhra Pradesh High Court has issued orders to Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) to maintain interim status quo on the proposed merger of Ranbaxy Laboratories with Sun Pharmaceutical Industries. This was in a response to a writ petition filed by some retail investors who alleged insider trading in Ranbaxy shares before announcement of the deal on April 7.

Ranbaxy scrip had shot up over 8 per cent to close at Rs 459.55 a share on BSE in a weak Mumbai market on April 4, the last trading day before the announcement, which indicated the market had some inkling about the deal.

After the formal announcement on April 7, Ranbaxy shares opened almost 10 per cent up but crashed later and ended the day at Rs 445.2, down over 3 per cent in a flat Mumbai market.

The court issued notices to Securities and Exchange Board of India (SEBI), BSE, NSE, Sun Pharma, Ranbaxy, Daichii Sankyo and Silver Street Developers, a part of Sun Pharma, the respondents in the petition filed by Tammali Shiva Kumar and Undi Venkatasubbaraju.

“There shall be interim status quo, as prayed for,” Justice P Naveen Rao said in his order, court filings reveal.

The investors claimed that there was heavy trading of Ranbaxy stock just six trading sessions prior to the announcement of this deal.

Therefore, the petitioners requested the court to ask SEBI to investigate the insider trading of Ranbaxy shares and take appropriate actions against Mumbai-based Sun Pharma and its wholly-owned arm Silver Street Developers LLP.

Earlier, SEBI had initiated investigations to probe possible insider trading charges. Sun Pharma had denied the insider trading charges, saying that the matter pertaining to acquisition of shares of Ranbaxy by Silver Street Developers LLP “does not violate insider trading rules”. 

On April 7, Sun Pharma announced that it would take control on Ranbaxy in an all-stock transaction with a total equity value of $3.2 billion, along with debt of $800 million, taking the overall deal value to $4 billion.

This could be the biggest domestic M&A deal ever and by far the top pharma deal in local currency terms.

Citi and Evercore are acting as financial advisors for the transaction while Shearman & Sterling LLP, Crawford Bayley & Co and S. H. Bathiya & Associates are the legal advisors to Sun Pharma. ICICI Securities is the financial advisor while Luthra & Luthra Law Offices and Amarchand & Mangaldas & Suresh A Shroff & Co are the legal advisors to Ranbaxy for the transaction. Daiichi Sankyo’s financial advisor for the transaction is Goldman Sachs and its legal advisors are Davis Polk & Wardwell LLP and Amarchand & Mangaldas & Suresh A Shroff & Co.

(Edited by Joby Puthuparampil Johnson)

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