Clearances for Sun-Ranbaxy merger may be delayed

Sun Pharma and Ranbaxy Laboratories might take longer than usual to secure all regulatory clearances for their proposed merger, sources said.

The merger, announced on April 6, is being studied by the Securities and Exchange Board of India and the Competition Commission of India.

A senior Sun Pharma executive has reached out to a few government departments, seeking intervention to expedite approval processes.

“They (the companies) are concerned unless and until the approvals are in place and the deal is complete, the Sun Pharma management will be unable to officially intervene in Ranbaxy plants and take corrective measures or resolve pending issues with the US drug regulator,” a senior government official whom Sun Pharma Managing Director Dilip Shanghvi recently met here, told Business Standard.

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Sun Pharma and Ranbaxy declined to comment for this story.

On April 6, Sun Pharma announced it would buy Ranbaxy Laboratories from Japan’s Daiichi Sankyo in an all-share deal pegged at $4 billion, including debt of $800 million on Ranbaxy’s books.

A senior CCI official said the company had filed an application seeking approval about two months ago.

However, the case is still in the preliminary examination stage and is yet to be taken up by the commission’s members.

Their approval might be delayed as the two companies had competed with each other earlier and, therefore, the case might require a detailed investigation by CCI, the official said.

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“It is an important case and there are various complexities involved. It requires close evaluation and is under examination,” CCI Chairman Ashok Chawla said.

Typically, CCI takes decisions related to mergers and acquisitions within 30 days, though it can do so within 210 days of the filing of application in this regard.

Experts on competition laws say CCI might scrutinise the proposed combination under the revised fees of Rs 50 lakh (Rs 5 million) for Form-II filing, which is usually valid when two competing players are merged to form a single entity.

This requires greater reporting on the proposed M&As.

The proposed merger also requires approvals from stock exchanges, Securities and Exchange Board of India, the high courts of Gujarat, Punjab and Haryana, creditors and shareholders of both companies.

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Experts say a Sebi clearance usually came within 21 days of the filing of an application by a company.

However, the Sun Pharma-Ranbaxy case might take longer, given the need for additional queries or investigation by Sebi. Sebi is already conducting an investigation, following allegations of insider trading.

It had indicated an approval might take time due to legal hurdles.

“As a matter of policy, we would not like to offer any comment on specific cases,” a Sebi spokesperson said, responding to a query.

Through the three sessions preceding the announcement of the deal on April 6, Ranbaxy’s shares had jumped 24 per cent and its trading volumes had tripled.

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A single-judge Bench had ordered status quo on the case, restraining the proposed merger on the basis of a plea by two petitioners (one a small investor in the companies).

The petitioners had sought the court direct Sebi to probe allegations of insider-trading in the case.

Subsequently, however, the stay was lifted as the court decided the merger process was outside the purview of the ongoing probe.

The government official quoted earlier said Sun Pharma was keen on early completion of the deal so that it could take the required steps to resolve various issues pertaining to Ranbaxy’s ailing facilities.

A LONG WAIT

• Sun Pharma had announced on April 6 that it would buy Ranbaxy Laboratories from Japan’s Daiichi Sankyo in an all share deal pegged at $4 billion
• The proposed combination requires approvals from the stock exchanges, Sebi, CCI, the high courts of Gujarat, Punjab and Haryana, creditors and shareholders of both companies

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