Seen as one of the the most exciting merger and acquisition deals since Ranbaxy’s acquisition by the Japanese major Daiichi Sankyo, the US-based multinational pharma company Abbott has acquired the domestic formulations business of Piramal Healthcare Limited.
The deal was signed for $3.72 billion with $2.12 billion to be paid upfront and $400 million annually for the next four years.
Abbott has paid the equivalent of nine times the sales revenue of Piramal’s health service division.
This deal catapults Abbottt to the No. 1 position in the Indian pharmaceutical market edging out the current leader, Cipla. It also increases Abbott’s presence in the emerging markets.
“Emerging markets represent one of the greatest opportunities in health care — not only in pharmaceuticals — but across all of our business segments. Today, emerging markets represent more than 20 per cent of Abbott’s total business,” said Mr Miles D. White, chairman and chief executive officer, Abbott.
“With this deal, the combined Healthcare Solutions and Abbott businesses will become the clear market leader in India, with a market share of approximately 7 per cent,” said Mr Ajay Piramal, chairman, Piramal group. The Indian pharmaeutical industry is not enthused by the deal. Mr Daara Patel, secretary general of the Indian drugs manufacturers association said it’s not a good thing for the Indian industry.
“We won’t have our own identity. They can stop manufacturing any time and start importing from wherever they like and there is nothing we will be able to do about it.”
However the brokerage house First Global sees several more deals happening. “MNCs will be buying out or taking stake in Indian companies because they see good growth in the Indian pharma market,” said Ms Devina Mehra. The stock markets gave the thumbs down to the Piramal stock which lost almost 12 per cent. The markets felt that Piramal had given away its cash cow, which accounted for 55 per cent of its total business. The stock price of Abbott India was up 4 per cent, as it is the US parent that was signing the deal.