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Sun Pharmaceutical Industries ::
CPD Merger: Simplifying US Operations
Quick comment: Caraco (CPD, Sun’s 75.8%-owned
US-based subsidiary), as approved by its Board, has
entered into a merger agreement with Sun Pharma. This
agreement provides that the remaining (minority)
shareholders will receive a cash payment of US$5.25
per share (US$4.75 was Sun’s offer price for privatizing
CPD) upon closure of the transaction. This buy-out will
translate into roughly US$53mn cash outflow for Sun
(US$900mn net cash on its balance sheet). The merger
agreement is subject to shareholder approval (75%
approval including Sun’s share) and, possibly, certain
court case resolution (three class action suits pending).
13 year-long chapter comes to an end. CPD was
Sun’s entry vehicle into US market 13 years ago when
Sun acquired a ~40% stake in the company for
US$7.5mn (current market cap is US$209mn).
Rationale: The merger will give Sun full control over
CPD’s operations (marketing and manufacturing). This
is especially relevant in view of the FDA issues at CPD’s
Detroit facility. As well, the acquisition will help Sun
strengthen its US marketing and sales function to
achieve optimal market share outcome. We highlight
that the recent few launches (including Optivar, Exelon,
hydrocodone, etc.) by CPD achieved limited (under
10%) market share. Post the CPD acquisition, Sun will
be able to capture full benefits of its end-to-end
capabilities in the US market.
Impact on our views: If this transaction is
consummated, it could structurally improve Sun’s US
operations and, therefore, we view it as a clear
long-term positive. Near term, we believe the merger is
good for the stock since it removes the overhang of a
marketing transition from CPD to Sun (since product
agreement terminates in Jan-12). We retain our OW
rating on the stock. Taxotere approval is the next key
product catalyst, we believe.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun Pharmaceutical Industries ::
CPD Merger: Simplifying US Operations
Quick comment: Caraco (CPD, Sun’s 75.8%-owned
US-based subsidiary), as approved by its Board, has
entered into a merger agreement with Sun Pharma. This
agreement provides that the remaining (minority)
shareholders will receive a cash payment of US$5.25
per share (US$4.75 was Sun’s offer price for privatizing
CPD) upon closure of the transaction. This buy-out will
translate into roughly US$53mn cash outflow for Sun
(US$900mn net cash on its balance sheet). The merger
agreement is subject to shareholder approval (75%
approval including Sun’s share) and, possibly, certain
court case resolution (three class action suits pending).
13 year-long chapter comes to an end. CPD was
Sun’s entry vehicle into US market 13 years ago when
Sun acquired a ~40% stake in the company for
US$7.5mn (current market cap is US$209mn).
Rationale: The merger will give Sun full control over
CPD’s operations (marketing and manufacturing). This
is especially relevant in view of the FDA issues at CPD’s
Detroit facility. As well, the acquisition will help Sun
strengthen its US marketing and sales function to
achieve optimal market share outcome. We highlight
that the recent few launches (including Optivar, Exelon,
hydrocodone, etc.) by CPD achieved limited (under
10%) market share. Post the CPD acquisition, Sun will
be able to capture full benefits of its end-to-end
capabilities in the US market.
Impact on our views: If this transaction is
consummated, it could structurally improve Sun’s US
operations and, therefore, we view it as a clear
long-term positive. Near term, we believe the merger is
good for the stock since it removes the overhang of a
marketing transition from CPD to Sun (since product
agreement terminates in Jan-12). We retain our OW
rating on the stock. Taxotere approval is the next key
product catalyst, we believe.
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