The Hindu Business Line : Ranbaxy buys Romanian co Terapia for Rs 1,445 cr

Close on the heels of taking over the generic business of GlaxoSmithKline Plc's Allen SpA in Italy, Ranbaxy Laboratories Ltd, on Wednesday, announced the acquisition of Romanian pharmaceutical company, Terapia SA, for $324 million (Rs 1,445 crore).

Ranbaxy has picked up 96.7 per cent stake in Terapia from buyout fund Advent International Corp. Terapia registered revenues of $80 million in 2005. The transaction is funded from the proceeds of Ranbaxy's recent $440-million (Rs 1,962 crore) FCCB issue.

The purchase will give the domestic pharma company access to two manufacturing plants and 157 drugs covering a wide range of ailments related to the heart and the central nervous system. Terapia has 60 products it expects to introduce in the next two to three years.

Hotly contested bid

Mr Malvinder Mohan Singh, CEO and Managing Director, Ranbaxy, told Business Line, "This was a hotly contested bid and we managed to bag the deal due to the right strategic fit and ability to add value to the company." The company has paid 11.6 times the operating profit of Terapia, recorded by Terapia last year, which is much lower than the acquisition price paid by other pharma companies. For instance, market sources said that Dr Reddy's Ltd paid 12.6 times the EBIDTA for acquiring Germany's Betapharm Arzneimittel GmBH, a deal it beat Ranbaxy too.

Focus on Europe

Europe is one of the focus markets for Ranbaxy and in order to gain physical size, the company is looking at both organic and inorganic growth. Mr Singh said that the two acquisitions are different from each other and the buyout of Allen would help Ranbaxy achieve size and scale in a relatively small market.

"Terapia represents exceptional value for our stakeholders. Within the Ranbaxy fold, it unleashes multiple synergies of product development, product flow, low cost manufacturing, proximity and access to high growth markets," he added.

In a statement, Ms Joanna James, Managing Director Central Europe, Advent International, said, "We have been strategic investors in Terapia and it has been our endeavour to add value to the entity at every point in the value chain."

While the transaction would be concluded within the second quarter of 2006, integration of the two companies would be critical.

Mr Singh said the field forces of the two companies would be merged and this would be further strengthened. Terapia is present in branded generics, generics, and over-the-counter (OTC) drugs and there is no overlap. "Terapia has a strong management team and all of them would continue under the new set up," he added.

Analysts tracking the sector said that the price paid by the company is not very high and these small acquisitions could help Ranbaxy grow inorganically to reach its $2-billion goal by 2007.

The share price of Ranbaxy rose by 3.36 per cent on Wednesday to close at Rs 411.15 on the BSE.

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