Ranbaxy shares fall again on US probe fearsJuly 17th, 2008 - 5:11 pm ICT by IANS
New Delhi/Mumbai, July 17 (IANS) Top Indian drug maker Ranbaxy Laboratories and Japan’s Daiichi Sankyo Thursday once again said their consolidation deal struck last month was “binding and final” but the company’s scrip fell 4.40 percent on the Bombay Stock Exchange (BSE) on fears of US probe into quality of Ranbaxy drugs. The two companies said the agreement struck by Daiichi Sankyo to buy the entire stake of Ranbaxy’s promoters, Malvinder Mohan Singh and family, in the Indian company was binding despite the intense media speculation over the past few days.
“Daiichi Sankyo, Ranbaxy and the Singh family, remain committed to the transaction and to the vision of creating a complementary business combination that provides sustainable growth by diversification and and an enhanced global reach,” their statement said.
“All the synergies expected to accrue to the combine remain intact as before,” the statement said.
“The share purchase and share subscription agreement has already been unanimously approved by the boards of directors of both companies. Coupled with the approval now in place from the shareholders, this clears the decks for the deal to proceed as planned.”
The statement came in the wake of fears that the deal may get derailed following a case filed by the US Justice Department in a Maryland federal court alleging Ranbaxy had forged documents relating to a probe into the quality of the company’s drugs.
The United States Food and Drug Administration (USFDA) is expected to launch a probe into these allegations.
With about 23 percent of Ranbaxy’s $1.6 billion revenues last year coning from the US, investors are naturally wary of the probe as it can affect the company’s US business in a big way, analysts said.
“Rumours about the impending offer of Japan’s Daiichi as well as news of the USFDA investigation against the company is causing the gyration in stock price,” said Ashok Jainani, research head of Khandwal Securities.
This resulted in the Ranbaxy stock dropping by 4.40 percent, or Rs.20.70, at Rs.450 during afternoon trade Thursday after opening at Rs.477.
The scrip tumbled 23 percent Monday and Tuesday after charges against the Indian drug maker became known during the weekend.
The scrip bounced back Wednesday and vaulted 15.02 percent to end the day at Rs.470.70. But Thursday saw investors still a little jittery about the probe into Ranbaxy’s drug sales in the US.
The mega deal - the largest in India’s $7.3 billion pharmaceutical industry - was announced last month and was estimated to value Ranbaxy at $8.9 billion and catapult the combined entity as the world’s 15th biggest drugs maker from the current 22nd position.
The promoters of the group, led by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, hold a 34.8-percent stake and will get Rs.95.76 billion ($2.4 billion) for their stake.
Along with open offer for 20 percent stake, which Daiichi Sankyo will make soon, the Japanese company will spend an estimated $4.6 billion for the controlling stake.
Tags: ashok, boards of directors, bombay stock exchange, bse, business combination, daiichi sankyo, diversification, food and drug administration, gyration, media speculation, mohan singh, ranbaxy shares, scrip, share purchase, stock price, subscription agreement, sustainable growth, synergies, us justice department, usfda