Dr. Reddy's Laboratories Ltd said on Wednesday it has bought a plant as well as select divisions of Wockhardt Ltd’s branded generics business in India, Nepal, Sri Lanka, Bhutan and the Maldives.
But the terms of the transaction differ from the original acquisition plan due to the outbreak of Covid-19, the infectious disease caused by the new coronavirus, the companies said in a statement.
The original deal, reported in February, was worth for Rs 1,850 crore (about $260 million). The deal included a portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, dermatology, gastroenterology, and pain and vaccines. In the revised agreement, Dr Reddy's will pay the same amount but in three parts.
First, it will pay Rs 1,483 crore to Wockhardt on the closing date of the deal. Dr Reddy's has likely paid this amount as the deal has closed.
Second, Dr Reddy's has deposited Rs 67 crore in an escrow account. This will be released based on adjustments made for net working capital, employee, contractual and statutory liabilities, among others.
Third, Dr Reddy's will hold back the remaining Rs 300 crore. It will release this amount if revenue from sales of the products that are part of the transaction exceeds Rs 480 crore in the 12 months after the closing date.
Wockhardt said its board approved amending the agreement with Dr Reddy's to allow flexibility for assessing the impact of the pandemic on the valuation of the deal. It also said that the transfer of its manufacturing plant at Baddi in Himachal Pradesh to Dr Reddy's as part of the agreement has been delayed because of the pandemic.
Another deal was affected in recent times but not due to coronavirus. In April, Aurobindo Pharma Ltd’s planned acquisition of the US generic oral solids and dermatology businesses of Sandoz Inc., a unit of Novartis AG, fell apart.
Aurobindo said at the time the agreement was mutually terminated as approval from the US Federal Trade Commission for the transaction was not obtained within anticipated timelines.