Torrent Pharmaceuticals limited, flagship company of the Torrent Group, announced the acquisition of Elder Pharmaceuticals’ branded formulation business in India and Nepal for Rs2,000 crore. Through this strategic move the company aims to strengthen its core prescription based business and improve its market share in the women healthcare, pain management nutrition segments.
“Torrent has entered into a definitive binding agreement with Elder to acquire its branded domestic formulations business in India and Nepal for a consideration of Rs2,000 crore,” Torrent Pharmaceuticals said in its official statement. The deal is expected to close in the first half of 2014, statement added.
Torrent Pharmaceutical’s stock on BSE ended the session weak after falling by 4.04 per cent to Rs479.50 while stock price of Elder Pharmaceuticals dropped by 8.17 per cent to Rs298.30. Analysts said that both the stocks fell despite the news of acquisition because the market flow was negative due to heavy profit booking by investors and institutions.
The statement further added that Torrent would fund the acquisition through a mix of internal accruals and bank borrowings. Elder’s India business comprises a portfolio of 30 brands including some market leading ones in women healthcare, pain management and wound care products.
Commenting on the acquisition, Torrent Group Chairman Sudhir Mehta said, “The transaction is a strategic fit for Torrent and will strengthen its core prescription based business. This acquisition strengthens our position in the women healthcare, pain management and vitamins/ nutrition segments by enhancing and accelerating market access. It is also expected to enable cost and revenue synergies in Torrent’s domestic formulation business.”
Elder Pharmaceuticals, acquisition of its India operations for Rs2,000 crores comes as sign of relief as the company would now be able to utilise the funds to pay off its debts. The company presently has a net debt of Rs1,300 crore on its balance sheets. “This path breaking domestic consolidation by Torrent addresses our recent challenges and will significantly help Elder de- leverage its balance sheet. We will now focus and grow our in- licensing, anti- infectives and exports businesses,” said Alok Saxena, Managing Director and CEO of Elder Pharmaceuticals.
Elder Pharmaceuticals will only be selling the intangibles to Torrent Pharmaceuticals. Under the proposed transaction, the India Business is being sold as a going concern on a slump sale basis and the transaction will also involve the transfer of employees engaged in sales, marketing and operations of the India Business.
Apart from that, Elder would also continue to manufacture and supply products at existing facilities for Torrent for three years, Torrent said in its statement. Torrent Pharmaceuticals has a turnover of over Rs3,200 crore and produces formulations and bulk drugs at plants at Indrad, Baddi and Sikkim. Elder Pharmaceuticals has brands such as Shelcal, Eldervit and Formic, has six manufacturing facilities for formulations and active pharmaceutical ingredients.