Torrent Expects JB Pharma Deal to Reach Finalization in 15-18 Months
Over the next 15 to 18 months, Torrent Pharmaceuticals anticipates that the Rs.19,500-crore agreement to purchase the majority stake in Mumbai-based J B Chemicals and Pharmaceuticals will be finalized.
According to the agreement, Torrent will pay about Rs.11,917 crore to promoters Tau Investment Holdings Pte Ltd (a division of a global investment group) for a 46.39 percent interest in the company.
This makes it the second largest deal in the domestic pharmaceutical sector after Sun Pharma's 2015 acquisition of Ranbaxy.
At the same acquisition price of Rs.1,600 per share (totaling Rs.719 crore), it would also purchase an additional 2.80 percent of JB Chemicals from certain workers.
Following this, it would launch an open offer to purchase 26 percent of the company from the open market at a price of Rs.1,639.18 per share, or Rs.6,842.8 crore, in accordance with listing regulations.
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For the purchase, the corporation would primarily require approval from the Securities and Exchange Board of India (SEBI), stock exchanges, and the Competition Commission of India (CCI).
JB Pharma will combine with Torrent following the acquisition of shares. 51 shares of Torrent will be distributed to each shareholder who owns 100 shares of JB Pharma.
Strategically, the agreement offers up unexplored therapeutic areas like ophthalmology and provides Torrent with access to JB Pharma's top brands in the chronic segment.
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The agreement is anticipated to increase Torrent's market share in the Indian pharmaceutical industry and broaden its platform into contract development and manufacturing in addition to fostering operational synergies.
Through the acquisition, Torrent will increase its market share in the IPM and get long-term access to the CDMO industry. Additionally, it would provide more scalability and consolidation in important global markets.
The second-largest deal in the Indian pharmaceutical industry to date is the one between Torrent and JB Pharma.
With a target price of Rs 3,580, Nomura kept its rating on Torrent Pharma at ‘Neutral’, suggesting a seven percent increase from the previous closing. According to the brokerage, Torrent's proven M&A structure and track record of successful acquisitions should reassure investors. Nomura noted that the deal was significantly larger than Torrent's prior buyouts, even if it is anticipated to result in both short-term cost efficiencies and long-term revenue improvements.
In an all-stock deal valued at USD 4 billion, including USD 800 million in debt, Sun Pharma had announced in April 2014 that it would buy struggling rival Ranbaxy.
A year later, in March 2015, the merger was "consummated" once the necessary permissions were obtained.
In yet another significant transaction, Mankind Pharma paid Rs.13,768 crore to purchase Bharat Serums and Vaccines Ltd (BSV) last year.