Financial Daily from THE HINDU group of publications
Friday, Sep 02, 2005
Mergers & Acquisitions
Ranbaxy, Wockhardt ready war chests for acquiring Alpharma
New Delhi , Sept. 1
PHARMACEUTICAL companies eyeing overseas acquisitions are finding it relatively easy to mobilise funds. According to investment banking circles, Ranbaxy Laboratories Ltd and Wockhardt Ltd, which are both in the race to acquire stakes in US-based Alpharma Inc, have managed to build a war chest of $1billion each.
Sources said that both companies have managed to convince overseas as well as domestic funding institutions to back their buy-out proposals. Besides raising money through the FCCB route and getting private equity funds to invest, lenders through a consortium are also open to financing such acquisitions, they added.
"Depending on the strength of the balance sheet of the Indian company and its appetite for expansion, institutions are willing to invest in such structured acquisitions," said a top investment banker.
In fact, Mr Malvinder Mohan Singh, President, Ranbaxy, had told Business Line earlier that even if the target company is "as large as us, raising funds would not be a problem".
However, in the contest for a stake in the $1.3 billion-Alpharma, Wockhardt is believed to be ahead as the synergy between the Indian and foreign company is much higher, said industry sources.
Mr Sanjiv D. Kaul, Management Advisor, ChrysCapital, said, "It is not important which of these two companies clinch the deal. But if either of them pull it off, it will be good news for the industry. Indian companies will then be forerunners for some large international transactions as they definitely do have the potential for it."
Sources also indicated that if pharma companies decide to set up special purpose vehicles (SPV) after acquisitions for a smooth merger, financial institutions would also help in debt restructuring.
Meanwhile, when contacted, officials at Ranbaxy and Wockhardt refused to comment, terming these as "speculations".
However, both the companies have, in the past, maintained that they are actively looking at acquisitions.
Alpharma Inc, in its company Website, recently reiterated, "It is actively considering various strategic alternatives to maximise shareholder value. To date, the company has not entered into, and its board of directors has not approved, any material definitive agreements regarding strategic alternatives, and the company's policy is to not comment on potential transactions."
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