The Competition Commission of India cleared the $3.2-billion Sun Pharmaceutical Industries’ purchase of Ranbaxy Laboratories on the condition that the companies divest seven brands of medicines within six months.
In each of the seven drugs, the regulator said, the proposed merger was likely to have an appreciable adverse effect on competition in the relevant market the product was sold. In six of the seven drugs, the combined entity of Sun Pharma with Ranbaxy would have captured a market share of at least 60% to a maximum of 95%, according to CCI’s analysis. The least combined market share was of hypertension therapy, with a maximum of 45%.
Under the terms set forth by CCI, Sun Pharma will divest one brand under the brand name, Tamlet, which brought the company Rs 2.8 crore in sales during the 12 months ended October 2014, according to data from industry body AIOCD-AWACS. Ranbaxy will sell six brands whose sales amount to Rs 46.22 crore for the same period.
“The parties shall, for a period of five years from the closing date, not acquire direct or indirect influence over the whole or part of the divestment product(s),” CCI said in its order.
The CCI, in its order, also said the companies do not have to divest any manufacturing facilities or intellectual property rights. Sun Pharma said these products constitute less than 1% of the combined entity’s revenue in India. The company had posted net sales of Rs 16,004.4 crore in fy14 while Ranbaxy reported Rs 6,657.039 crore.
Both the companies have to appoint a senior management employee, within seven days of the date of the order, that is December 5, to oversee the transition. The representative will make a monthly report to CCI on the economic viability, marketability and competitiveness of the divestment product.
“It revalidates our view that the Sun Pharma and Ranbaxy businesses complement each other with limited product overlap, and will offer a comprehensive product basket to enable future growth,” Dilip Shanghvi, managing director of Sun Pharma, said in a statement on the Bombay Stock Exchange.