The formal bidding process to take over German pharma major Merck's generic business is set to begin shortly. Merck's advisor for the deal and the US-based investment-banking firm, Bear Stearns, is set to invite non-binding bids in the first week of March. Indian Pharma majors such as Ranbaxy, Dr Reddy's and Cipla, which are in the race to acquire the German pharma major's generic business, have quietly started doing the groundwork to participate in the preliminary bidding process which will allow them to start due-diligence by the second week of March.
The buzz is that Dr Reddy's is understood to have appointed UBS as its advisor for the deal. "Right now, pharma companies are in the process of finalising advisors. There are talks that Ranbaxy has appointed Citigroup," said a Mumbai-based investment banker close to the global bidding process. Under the rules of non-binding bid, the prospective bidders have to give an indicative valuation, which can be reversed later. Analysts and investment banking sources said Merck's valuation would be anywhere between $4.5-$5.5 billion.
The Merck business, if it goes to Ranbaxy, could catapult it to the third position in the world generics market in terms of size, third-largest drug maker after Teva Pharmaceutical of Israel and Sandoz, the generic arm of Switzerland-based Novartis.
Private equity firms are now talking with pharma majors to jointly bid for Merck. Blackstone and Carlyle, two of the largest funds in the private equity space, are said to be partnering with Ranbaxy and Cipla. These firms would join three US-based private equity firms — Cinven, Permira and Texas Pacific Group — which are also said to be interested in the business.
The business had revenues of around $2.5 billion (Rs 11,056 crore) in 2006. The generic business makes products such as Epipen, a life-saving, pen-sized epinephrine syringe that enables self-injection of a single dose.
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