The Hindu Business Line : Ranbaxy jumps on reports of not buying Merck business

New Delhi March 20 Ranbaxy Laboratories Ltd's shares saw a jump of 6.15 per cent on Tuesday, ostensibly on the back of media reports of the company is pulling out of the race to acquire German pharmaceutical company Merck KgaA's generic business on concerns of over-valuation.

However, when contacted, a Ranbaxy spokesperson refused to either `confirm or deny' the development.

Mr Malvinder Singh, CEO, Ranbaxy, has in the past maintained that he will not enter into a bidding race, and would rather look at acquiring Merck at a `fair value'.

Industry analysts had earlier estimated the value of Merck's generic business at $5-$6 billion, pointing out that it could be too steep a price for the Indian company to pull off alone, and suggested that it take the support from other private equity firms. Goldman Sachs and Citigroup were advising Ranbaxy on the deal.

Meanwhile, Ranbaxy's shares jumped up by Rs 19.50 during the intra-day trade. The stock ended at Rs 336.35 from the day's opening price of Rs 318, the day's high being Rs 343, after losing about 25 per cent since the company first said in early January that it might bid for Merck's generics business.

Other contenders

Ranbaxy, however, was not the only Indian company to enter the bidding process to acquire the German firm. Apparently, Cipla (part of a consortium), Dr Reddy's and Torrent Pharma had also shown interest in the acquisition. The global bidders include Iceland's Actavis Group HF, Israeli company Teva Pharmaceutical Industries Ltd and the US-based Mylan Laboratories.

Ranbaxy reported sales of Rs 6,022 crore last year primarily due to the 180-day exclusivity advantage it had on the launch of cholesterol lowering, Simvastatin.

Global operations

Though its Brazil, Russia, India, China and South Africa (BRICS) markets did really well last quarter, sales in Europe had dropped by 6 per cent, owing to stiff competition in the UK market and impact of healthcare reforms in France and Germany.

Last year, the company had acquired the Romanian company Terapia for about $324 million, and has since made it its hub for Europe.

Merck's generic sales were at about Rs 10,500 crore ($1.8 billion) for 2006. The company's generic business includes its operations in Brazil, Belgium, Italy, the Netherlands, Spain, and the UK, and also Alphapharm in Australia, Genpharm in Canada, Merck Dura in Germany, Scandharm in Sweden and Dey in the US.

The German pharma company had decided to divest its generic business soon after it bought biotech company Serono for $13.3 billion.

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