CCI Takes a Shine to Sun Pharma-Ranbaxy Deal With Some Riders

CCI Takes a Shine to Sun Pharma-Ranbaxy Deal With Some Riders

Finally, Sun Pharma and Ranbaxy received the approval from the Competition Commission of India regarding the long overdue USD 4 billion merger. The CCI gave the approval on the condition that the deal would have to be modified through divestment of 7 key products for meeting monopoly concerns.

CCI Approves But With Riders

The regulatory body, CCI that had ordered Ranbaxy to sell the 6 products and Sun to divest a single one, will also put in place a monitoring committee for overseeing compliance on the conditions placed forth to ensure merger does not impact competition.

FIPB or Foreign Investment Promotion Board had earlier approved this deal a few days ago. The Sun Pharma Ranbaxy deal had been announced as early as April this year. Following the merger, the nation’s largest and the world’s fifth biggest drug making pharmaceutical company would be born.

This is the first deal which the CCI has ever subjected to public scrutiny as it dealt prima facie with the violation of competition laws. In the CCI order dated 5th December 2014 and released on Monday, 3 days later, the regulatory body said, it “approves the proposed combination... subject to the parties carrying out the modification to the proposed combination.’’

The Modifications

CCI has directed Sun Pharma to engage in the divestment of products containing Tamsulosin + Tolterodine’, currently being marketed under the Tamlet brand name. Ranbaxy will also be needed to divest all products which contain the ingredient Leuprorelin, marketed and supplied under the Eligard brand name. Ranbaxy will also engage in divestment of products such as Terlibax, Triolvance, Raciper L, Olanex F and some others. As per the fair trade regulatory body, the modification to the proposed deal aims “to maintain the existing level of competition in the relevant markets in India.’’

Sun+Ranbaxy=Global Presence

The merged entity which results following the merger deal will have operations in 65 nations apart from 47 manufacturing facilities spread across 5 continents and a global portfolio of generic and branded products. It will also have an international presence. CCI Chairman Ashok Chawla also said this was the CCI’s final order in the case and it was likely to appoint the monitoring agency within a short span of time.

According to the order, Sun Pharma and Ranbaxy have 6 months in which to divest or procure the divestiture of divestment products.
“The divestiture shall not be given effect to unless and until the Commission has approved the terms of final and binding sale and purchase agreement(s) and the purchaser(s) proposed by the parties,” the order is reported to have said.

“The proposed combination shall not be effected by the parties until approved sale and purchase agreement(s) have been entered into in accordance with the order,” it also added. “The parties may require the potential purchasers to execute a confidentiality agreement before providing access to information regarding the divestment product(s),” CCI also said.

CCI spoke of the appointment of a monitoring agency to “monitor the due diligence process, including the preparation of data room documentation, in accordance with the monitoring agency agreement”.

“Sun Pharma and Ranbaxy are looking forward to progressing towards the completion of the transaction and will comply with the conditions laid down by the CCI within the specified time,” the two firms said in a joint statement following the CCI order.The two companies also said they have received the CCI order where acquisition of Ranbaxy by Sun Pharma has been approved “subject to compliance with certain conditions”. “Over the past few months, the CCI has sought information and detailed clarifications for the purposes of making its assessment. One of the preconditions of the order is that parties procure the divestment of seven products,” they also added. As regards the approval, Sun Pharma’s MD Dilip Shanghvi said: “It revalidates our view that the Sun Pharma and Ranbaxy businesses complement each other with limited product overlap, and will offer a comprehensive product basket to enable future growth.

Ranbaxy’s CEO Arun Sawhney also said, “We are confident that post closure, the combined entity will enable sustainable long term growth and deliver immense value for all stakeholders.”