Hyderabad-based Matrix Laboratories Ltd and Bangalore-based Strides Arcolab Ltd have decided to merge into a single company called Matrix Strides Ltd.
The new company will be India's seventh largest drug maker. Its combined turnover will be over Rs 1,000 crore (Rs 10 billion) with a net profit in excess of Rs 170 crore (Rs 1.70 billion).
Going by current stock prices, the merged entity will be valued at about $850 million. The Strides scrip rose 13 per cent to close at an all-time high of Rs 284.35 on the Bombay Stock Exchange, while Matrix rose 1.4 per cent to close at Rs 186.90.
The boards of both the companies have approved the deal, which is subject to a valuation exercise and due diligence. The two boards expect to meet within eight weeks to finalise the terms of the merger.
Matrix Strides will have 20 manufacturing plants, of which six are into active pharmaceutical ingredients (APIs), five into intermediates and eight into finished dosages.
"Of the six API plants, four are FDA approved and the remaining two are likely to get approval by the middle of next year," N Prasad, chairman and chief executive officer of Matrix, said.
Talking about operational synergies between the two companies, Prasad said: "Strides is more into finished dosages, while we are engaged in the manufacture of APIs and solid oral dosage forms.
"Besides, Strides is into a niche market segment of soft gels and steriles."
The new company would be able to cut production costs and strengthen its overseas presence, as well as its position as a supplier of anti-retroviral Aids drugs, Prasad added.
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