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SBICap Securities
Sun Pharma (Buy)
CMP: ₹627.80
Target: ₹721
Sun Pharmaceutical Industries has entered into a definitive agreement with Ranbaxy to acquire the company through purchase of all outstanding shares at ₹457 a share. The price per share is worked upon the deal being a swap of shares of 0.8 shares of Sun Pharma for each Ranbaxy share. The biggest takeaway is that Sun Pharma does not dip into its cash reserves ($1.6 billion) to acquire Ranbaxy, and its shareholders see earnings accretion in longer term. With this multi-billion-dollar merger and acquisition through, we expect Sun Pharma to have low appetite for any other sizeable acquisition (deployed $4.5 billion in the last 12 to 18 months). Sun Pharma’s focus then would be routed to scaling up the acquired operation and achieve compliance to fast track the manufacturing assets.
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