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The proposed Sun Pharma-Ranbaxy merger and the Lafarge-Holcim deal, which are likely to raise competition concerns in their respective sectors, will have to be vetted by the fair trade regulator, Competition Commission of India (CCI).
Sources in the CCI said the competition panel could seek modification in the deal structures in case it found the deals disturbing the fair trade eco-system.
Sun Pharma’s proposed acquisition of Ranbaxy Laboratories in an all-stock transaction, valued at over $3.2 billion, will need CCI nod. Defining the relevant market would be a key challenge for both the drug-makers and the CCI, say experts.
The merged entity, one of the largest in the pharmaceutical sector, will have a combined market share of 9.2 per cent with sales of $1.1 billion (around ₹6,600 crore). This will be above Abbott, which has a market share of 6.5 per cent.
Relevant market “The most important issue in this case will be the definition of the relevant market – whether the CCI defines the relevant market broadly or narrowly. The nature of the pharmaceutical industry and the demand substitutability analysis can potentially lead to multiple relevant markets,” said Gautam Shahi, Senior Associate in legal firm J Sagar Associates.
“In a previous case, the CCI defined the relevant market as the market for manufacture of ARV (antiretroviral) drugs. Hence, the CCI has shown that it is amenable to narrow market definitions. If it does so in this case also, then it will have to analyse the potential impact of the proposed combination in all the different relevant markets and decide accordingly.”
According to the combination regulation, the CCI’s approval is required when the enterprises’ value of the Indian entities concerned is above ₹1,500 crore or the combined turnover is over ₹4,500 crore, said Sharad Bhansali, Managing Partner at law firm APJ-SLG.
Long process Similarly, the merger of cement makers Lafarge SA and Holcim could potentially create a firm with total sales of €32 billion. Cement firms in India have already faced a penalty of ₹6,300 crore from the CCI after they were found indulging in cartelisation.
Vinod Dhall, Executive Chairman at Vinod Dhall–tt&a Competition Practice, said both the reported deals –Lafarge–Holcim merger and Sun’s acquisition of Ranbaxy – are major transactions in their respective sectors with significant impact on the Indian markets.
“These will need to be filed with the CCI which will have to examine these for their adverse effect on competition in India, including on regional markets (in case of cement), keeping in mind factors such as increased level of concentration, market shares and market power. The CCI will first have to decide whether these deals need to be taken to the second – more detailed phase of the inquiry. In that case, the process could take longer than usual,” Dhall said.
Holcim runs two large cement companies in India—ACC Ltd and Ambuja Cements Ltd – while Lafarge operates a local unit in the country.
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