This is probably the first instance where the Competition Commission of India (CCI) has ordered a public scrutiny of a proposed merger and acquisition (M&A) deal to ensure compliance to fair trade regulations.
Sun Pharmaceutical Industries and Ranbaxy Laboratories Ltd, which had announced a USD 4-billion deal in April this year, were asked late last night to make public details of their proposed transaction in a "prescribed format" within 10 working days.
"The company has received direction vide letter dated August 27, 2014 under Section 29(2) of the Competition Act, 2002 from the Competition Commission of India (CCI) directing the company to publish the details of the proposed combination in the prescribed format within 10 working days from the date of the said letter of the CCI," Ranbaxy Labs said in a stock exchange filing this morning.
In a similar filing, Sun Pharma also informed the stock exchanges that they "are in receipt of direction under Section 29(2) of the Competition Act, 2002 from the CCI directing Sun Pharma to publish the details of the proposed combination within 10 working days from August 27, 2014 in Form IV contained in Schedule II to the Combination Regulations".
Under this section, if the CCI is "prima facie of the opinion that the combination has, or is likely to have, an appreciable adverse effect on competition, it shall... direct the parties to the said combination to publish details of the combination within ten working days of such direction..."
Such disclosure needs to be made "in such manner, as it (CCI) thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination."
Earlier, the CCI had sought specific details from the two companies before approving the proposed acquisition of Ranbaxy in an all-stock deal by Sun Pharma.
For the CCI, this is one of the biggest M&A deals and also the first major transaction from pharma sector and therefore its decision in this case could have larger implications.
In case the CCI finds the deal in the current form could hurt fair competition in the domestic pharma market, it can even direct the companies to divest some assets as a pre-requisite for approval.
The USD 4 billion-worth deal would create the fifth- largest speciality generics company in the world and the largest pharmaceutical company in India.
The combined entity would have operations in 65 countries, 47 manufacturing facilities across 5 continents, and a significant platform of speciality and generic products marketed globally.
The format prescribed by the CCI for filing the details for public scrutiny would require the two companies to give specific details of the combination in form of a summary.
Besides, it involves CCI inviting "comments/objections/ suggestions in writing, from any person adversely affected or likely to be affected by the combination".
The comments can be on "an appreciable adverse effect on competition in the relevant market in India". Those submitting the comments would also need to provide "supporting documents, how such a person is adversely affected or is likely to be affected by the combination".
The rules prescribe that the CCI would not consider any unsubstantiated objections.
In April, Sun Pharmaceutical Industries announced it would acquire troubled rival Ranbaxy Laboratories in a USD 4-billion deal that includes USD 800 million debt. The transaction has valued Ranbaxy at 2.2 times its USD 1.8 billion revenue for 2013, or about Rs 457 per share.
Last month, the deal was approved by leading stock exchanges BSE and NSE. The 'no-objection' from the two exchanges would allow the two companies to file their scheme of amalgamation with the High Court for further clearance of the deal.
Shares of both Sun Pharma and Ranbaxy were trading with modest decline in early morning trade today at the BSE.