US-based Mylan Inc’s Rs 5,168 crore foreign direct investment (FDI) proposal to finance the acquisition of Agila Specialties Pvt Ltd has got the approval of Foreign Investment Promotion Board (FIPB), the nodal government body monitoring foreign investment in the country. Agila is a subsidiary of Bangalore-based Strides Arcolab Ltd.
The proposal was cleared after an FIPB meeting on August 27, reported news agency PTI, quoting economic affairs secretary Arvind Mayaram.
UPDATE: Since the size of foreign proposal was above Rs 1,200 crore, it went to the Cabinet Committee on Economic Affairs (CCEA) for final approval. The proposal was now been cleared by the CCEA, as per an official statement issued on September 3.
The investment amount of Rs 5,168 crore could be the first tranche of a much larger payment due for the deal announced early this year. Mylan is buying the business for $1.6 billion (around Rs 8,600 crore based on forex rates when the deal was announced and Rs 10,700 crore now) in cash. In addition, the agreement provides for an additional $250 million in potential payments by Mylan, if Strides satisfies certain conditions.
This is the third-largest M&A deal ever in the pharmaceutical sector in India, behind Daiichi Sankyo’s acquisition of the majority stake in Ranbaxy and Abbott Laboratories’ purchase of the domestic formulations business of Piramal Healthcare.
The FIPB clearance for the investment paves the way for the completion of the transaction. FIPB had first taken up the proposal in March this year but had deferred its approval over several meetings thereafter.
The green signal for the large deal comes even as certain government authorities have been against FDI in pharma fearing that it would push up the cost of healthcare as foreign drugmakers acquire Indian firms and then jack up prices of medicines. This was especially for deals involving change in control of an Indian drugmaker.
(Edited by Joby Puthuparampil Johnson)