Competition panel seeks public comments on Sun-Ranbaxy merger deal

04 Sep 2014

India's fair trade watchdog the Competition Commission of India (CCI) today said it is of the view that Sun Pharmaceutical Industries' $3.2-billion acquisition of Ranbaxy Laboratories Ltd could hurt competition and has sought more details from the companies.

CCI said it had, in April, received a notice from Sun Pharmaceuticals Industries Limited and Ranbaxy Laboratories Limited in relation to the merger of Ranbaxy into Sun Pharma.

As per the deal, Sun Pharmaceutical was to acquire troubled rival Ranbaxy Laboratories in a $4-billion deal that included $800 million debt. The transaction has valued Ranbaxy at 2.2 times its $1.8 billion revenue for 2013, or about Rs457 per share. 

The commission said it is of the prima facie opinion that the combination is likely to have an appreciable adverse effect on competition and accordingly directed Sun Pharma and Ranbaxy to publish details of the combination within ten working days.

The parties are required to publish the details of the combination in all-India editions of four leading daily newspapers, including at least two business newspapers, and also host the same on their respective web sites for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination, according to the CCI order.

The said details are also available on the website of the commission, CCI said.

The commission has invited comments / objections / suggestions in writing, from any person or persons adversely affected or are likely to be affected by the combination.

The comments should reach the secretary to the commission at its office at Hindustan Times House, 7th Floor, 18-20, Kasturba Gandhi Marg, New Delhi- 110001, within fifteen working days from the date of publication.

As per the provisions of section 29(3) of the Act, the commission invites comments / objections / suggestions in writing, from any person(s) adversely affected or are likely to be affected by the combination, to be addressed to the secretary, Competition Commission of India,

Sun Pharma had entered into a deal in April to buy Ranbaxy from Japan's Daiichi Sankyo Ltd to create the world's fifth-largest maker of generic drugs (See: Sun Pharma, Ranbaxy to merge in Rs24,000 all-stock deal). Both companies have previously said they expect to complete the deal by December.

This is the first time where the CCI has ordered a public scrutiny of a merger and acquisition (M&A) deal to ensure compliance of fair trade regulations.

CCI chairman Ashok Chawla also said on 29 August that major issue in the deal is whether the combination would result in high market concentration of certain molecules.

"The major issues obviously are that in many of the molecules, the basic building block in the pharmaceutical industry, whether in some of those molecules there is high market concentration which will emerge as a result (of the consolidation)." Chawla said.

The $4-billion deal would create the fifth largest specialty generics company in the world and the largest pharmaceutical company in India.