Sun Pharma’s proposed deal to buy out Ranbaxy would not be the first multi-billion dollar transaction for the Indian pharmaceutical sector. But it breaks the history trend of inbound deals dominating the top deals chart. Indeed, it also happens to be the biggest ever domestic M&A deal ever cutting across sectors.
Although the dollar value of the transaction would make it the third-largest ever in Indian pharmaceutical space (second if we take into account the enterprise value of $4 billion), looked at from a local currency standpoint it is just marginally short of the deal in which Daiichi Sankyo acquired a majority stake in Ranbaxy six years ago (factoring in the enterprise value it surpasses Daiichi's deal too, to become the top pharma deal ever).
The Sun-Ranbaxy combine will have a total market share of puny 9.2 per cent of the local prescription drug sales market which indicates how fragmented the industry is and the scope of further consolidation.
The last large M&A transaction in this space between two home-grown players happened in December last year when Torrent Pharma acquired Elder’s domestic formulation business for $322 million. In this deal several international players like Sanofi, GSK and Pfizer were in the race but the deal eventually went to Ahmedabad-based Torrent Pharma.
Biggest domestic M&A deal in the making
Although there have been much larger cross-border deals in the past Tata-Corus, Bharti Airtel-Zain, Vodafone-Hutchison, Hindalco-Novelis and BP-Reliance Industries’ JV, Sun-Ranbaxy transaction would be the top domestic deal ever, factoring out Vedanta-Cairn India transaction as Vedanta is essentially a UK-based company.
Other large domestic transactions in the past include a few intra-group deals such as Holcim moving to consolidating operations of two Indian arms ACC and Ambuja Cements; Reliance Industries-Reliance Petroleum merger; Reliance Power-Reliance Natural Resources merger besides HDFC Bank’s acquisition of Centurion Bank of Punjab.
(Edited by Joby Puthuparampil Johnson)
