Despite making a positive opening, shares of Ranbaxy went into a tailspin as the trade progressed and fell by 5 per cent to Rs 436.45 on the BSE.
At the NSE, the stock plunged 5 per cent to Rs 436.30.
On the other hand, shares of Sun Pharma gained 4.73 per cent to Rs 599 at the BSE. Later, the stock pared some of the gains and were trading higher by 1.35 per cent to Rs 580.
"Sun Pharmaceutical Industries Ltd and Ranbaxy Laboratories Ltd today announced that they have entered into definitive agreements pursuant to which Sun Pharma will acquire 100 per cent of Ranbaxy in an all-stock transaction," the two companies said in a statement.
Under these agreements, Ranbaxy shareholders will receive 0.8 share of Sun Pharma for each share of Ranbaxy.
The transaction has a total equity value of approximately USD 3.2 billion.