India’s largest drug manufacturer, Ranbaxy, has decided to pull out of the race to acquire German pharmaceutical company Merck’s generics after finding it over-valued.
Industry experts feel the $6 billion deal is beyond the reach of Indian bidders. Dr Reddys’ has not joined the race, Cipla is in just as an operator and is not putting any money.
Ranbaxy executives refused to comment on the development. "Ranbaxy believes the current valuation would have crossed the threshold beyond which it was unlikely to offer any benefits to the stakeholders," sources familiar with the development told Hindustan Times.
Ranbaxy's share price has been receiving a pounding after news about the company's Merck play started appearing.
Since February 8, when news about its Merck play started appearing, Ranbaxy’s share price declined by around 25 per cent to Rs 316 on March 19. On news of its pulling out its hat, Ranbaxy’s share price climbed 6.15 per cent on Tuesday to close at Rs 336.
Even through a leveraged buyout, Ranbaxy might not have managed to retain the majority stake in Merck and the private equity firm - Carlyle, which it had bid - would have been on the driving seat, analysts said.
Merck announced a possible sale of its generics division on January 5, 2007. The business ranks among the top five globally with annual revenues of $2.24 bn and a presence in over 90 countries.