Sun Pharma seals India's biggest overseas acquisition in 20 years
What's the story
Sun Pharmaceutical Industries, India's most valuable drug manufacturer, is acquiring New Jersey-based Organon for nearly $12 billion. As part of the deal, Sun will pay $14 per Organon share in cash, giving the company an enterprise valuation of $11.75 billion. Following the news, shares of Sun Pharma gained 7% to trade at ₹1,739.4 on the NSE. This will be the largest overseas acquisition by an Indian firm since Tata Steel acquired Corus for about $12 billion in April 2007.
Market expansion
The deal will help Sun expand into high-margin areas
The acquisition of Organon will significantly strengthen Sun Pharma's presence in the biosimilars market and women's health space. The Indian company has already established its presence in dermatology, onco-dermatology, and ophthalmology businesses. However, an Organon buyout will help it expand into high-margin areas with less competition. The deal is also expected to boost Sun's innovative research medicines portfolio in the US. Organon, listed in New York, focuses on women's health in areas such as breast cancer, contraception, osteoporosis and menopause.
Financial stability
Sun Pharma is raising debt for the acquisition
Sun Pharma is raising debt mainly to refinance Organon's debt, which it accumulated after being spun off from MSD. The Indian company had a net cash surplus of $3.2 billion (₹26,000 crore) on its balance sheet at the end of December, which it plans to use for buying Organon's equity. An ICRA credit report in March noted that Sun's liquidity position is strong with healthy cash flow generation and a net cash surplus.