The Hindu Business Line : Orchid looking at options to ward off threat

New Delhi, April 14 Ranbaxy-backed financial investment firm Solrex’s game plan in acquiring Orchid Chemicals & Pharmaceuticals Ltd may become clearer when the markets open on Tuesday.

While all the parties involved are tight lipped over their next move, sources said that Orchid’s management is weighing different options to ward off any takeover bid by Ranbaxy, after Solrex increased its stake to close to 12 per cent.

This is close to the 15-per cent mark, which is the trigger point for an open offer. While Ranbaxy’s management has denied a hostile takeover bid on Orchid, sources indicate that the status could change over the next few days.

Orchid Pharmaceuticals promoter Mr Kailasam Raghavendra Rao on the other hand is garnering support, including alliances with other pharma companies, to keep out Ranbaxy.

The takeover bid will also depend on other financial investors in Orchid. Major investors include Gazal Industrial Holdings (8.48 per cent), Macquarie Bank (5.13 per cent), Life Insurance Corporation of India (7.8 per cent), United India Insurance Company (2.48 per cent), Harpline (4.54 per cent) and Fidelity Trustee Company (2.66 per cent).

Also, the founders of Orchid have the option to convert 5 million warrants to 7.6 per cent of additional equity.

Possible partnership

On its part Ranbaxy is keen to strengthen its presence in the antibiotic segment and Orchid, which has a pipeline of antibiotic drugs, fits well in that strategy.

Orchid will also help Ranbaxy to strengthen its presence in the US.

From Orchid’s point of view, the promoters want to keep driving the company. But given the financial crisis being faced by the company, it makes it a target for larger firms.

Insiders suggest that Orchid may strike an alliance with Ranbaxy if Solrex increases its stake to over 15 per cent, in which case Mr Rao could continue to run the company.