The Competition Commission of India has approved the Sun Pharma-Ranbaxy merger with some caveats.
According to the conditions imposed by the Commission, the merged entity will have to divest seven drug formulations in which its combined market share goes up to 95 per cent, resulting in a monopoly.
The seven formulations include tamsulosin + tolterodine (combined market share of 90-95 per cent); rosuvastatin + ezetimibe (90-95 per cent); and leuprorelin (85-90 per cent). The others which adversely impact the market but their share is less than 80 per cent are terlipressin (65-70 per cent); olanzapine + fluoxetine (65-70 per cent); levosulpiride + esomeprazole (60-65 per cent); and olmesartan + amlodipine + hydroclorthiazide (40-45 per cent).
Acknowledging that the CCI approval was a step ahead, the companies said these products constitute less than 1 per cent of the combined entity's revenues in India.
This $4-billion agreement is the first merger deal where CCI had sought opinion from the public.In a statement, CCI said: “The Commission in its meeting held on December 5 approved the proposed merger between Sun Pharma and Ranbaxy, subject to the parties inter alia carrying out the divestiture of their products relating to seven relevant markets for formulations.”
Dilip Shanghvi, Managing Director of Sun Pharma, and Arun Sawhney, CEO & Managing Director of Ranbaxy, in a joint statement said, “The approval by CCI is a significant step forward. We are confident that post closure, the combined entity will enable sustainable long-term growth and deliver immense value for all stakeholders.”
According to the terms inked between Ranbaxy and Sun Pharmaceuticals in April, each Ranbaxy shareholder will get 0.8 shares of Sun Pharmaceuticals for every share of Ranbaxy.
On May 6, the CCI received a notice from Sun Pharmaceuticals and Ranbaxy Laboratories for the proposed merger of Ranbaxy with Sun Pharma.
While giving its nod the Commission said, on the basis of combined market share of the parties, the investigation focussed on some relevant markets for formulations where the proposed combination was likely to have an appreciable adverse effect on competition in the relevant market in India.
In addition to these relevant markets, the Commission also investigated two pipeline products of Ranbaxy and possibility of any vertical foreclosure in the market for active pharmaceutical ingredients (APIs).
On the basis of the replies submitted by the parties, the Commission decided that the adverse effect of the proposed combination on competition can be eliminated by suitable modification under the provisions of the Competition Act, 2002, it added.
The deal got the Foreign Investment Promotion Board (FIPB) nod on December 2. It is likely to create the fifth-largest pharmaceutical company in the world and the largest in India.