US-pharma major Abbott Friday announced acquisition of Piramal's Healthcare Solutions business for USD 3.72 billion (about Rs 18,000 crore) to become the largest drug manufacturer in India.
Piramal Group said it would use the proceeds to repay debt and other liabilities, invest the balance in its existing businesses and foray into new businesses.
The move would help Abbott garner seven per cent of the estimated Rs 55,000 crore Indian drug market.
Terming the acquisition as a "strategic action" to become the leading player in India, Abbott said it would pay USD 2.12 billion on closing of the transaction, expected in the second-half of 2010, and the remaining amount would be paid in four annual installment of USD 400 million for the domestic business only.
"This USD 400-million is a deferred but a definitive payment and not contingent upon any performance (on Piramal's part)," Piramal Group chairman Ajay Piramal said.
He said while a part of the proceeds would be used to pay long-term capital gains tax, "around Rs 1,300-crore would be used to repay debt". He added that group was also mulling a
special dividend pay-out to shareholders.
Immediately after the buyout announcement, Abbott India shares Friday shot up by about nearly 15 per cent to a one-year high Rs 1,210 but ended with close to 4 per cent gain
on the Bombay Stock Exchange.
Piramal jumped by over a little over 5 per cent to touch one-year high of Rs 599.90 but fell a sharp 12 per cent to end at Rs 502.35 on BSE.
Promoters of Piramal, currently among the top ten players, would retain their R&D, overseas and active pharmaceutical ingredients'(drug raw materials) business.
"This is a good time to be in business in India. We will use a part of the proceeds to enter new businesses which will be finalised going forward," Piramal said.
Abbott said the acquisition would be funded through internal accruals and would be done through its wholly-owned subsidiary.
As part of the deal, Abbott would get Piramal's manufacturing facilities and rights to market over 350 brands in the domestic business.
"The sale will also involve the transfer of more than 5,000 employees of the domestic formulation business," Piramal said, adding, "Piramal's Healthcare Solutions business will
become part of Abbott's newly-created, stand-alone Established Products Division."