Sanofi close to acquiring Elder Pharma’s local biz

Sources say deal final; Sanofi dismisses “market rumours”

The street was abuzz on Thursday that French drug maker Sanofi SA’s Indian arm was close to acquiring Elder Pharma’s domestic formulation business for over Rs 2,400 crore.

According to sources, the deal, chased by many multinationals for the past few months, has been finalised and the announcement is expected soon. However, when contacted by Business Standard on phone, spokespersons from both Sanofi India and Elder Pharma declined to comment. “We do not comment on market rumours,” Sanofi India spokesperson said. Phone calls made to Elder Pharma joint managing director Alok Saxena remained unanswered. According to an official source, the announcement is being delayed due to ill health of the company’s chairman and managing director Jagdish Saxena.

Shares of Elder Pharma gained 13.9 per cent on the BSE to close at Rs 364.25. It touched a high of Rs 374.90 during the day.

THE DEAL BOOK
Deal is expected to be valued at around Rs 2,400 crore
Elder Pharma has a debt of Rs 1,300 crore
Elder has a market capitalisation of around Rs 726 crore
Around two months ago, Elder Pharma appointed advisors to look at options for fund raising

Elder Pharma, promoted by Saxena, started operations in 1987. While the company began by selling basic antibiotic products, it later developed popular brands such as Shelcal and Ontac. Alok Saxena and Anuj Saxena, the two sons of the founder, now run the businesses.

Although Elder had told BSE in June it did not have any definite proposals for the sale of its domestic formulations business, a month later, it again informed the exchanges the company board had approved a proposal for “carrying out restructuring of the company’s business involving either raising of capital, hiving off of assets or other strategic options and (they) have decided to appoint advisors for this purpose”.

Sources say in future Elder Pharma was likely to focus aggressively in building over-the-counter (OTC) and direct-to-consumer (DTC) products after selling its domestic formulations business. Recently, the company also acquired the UK-based Max Healthcare for an undisclosed sum. Analysts suggest it could be a two-pronged strategy opted by the company. While on one hand, selling the domestic formulation business would help reduce the huge debt on its books, it would also allow the company to focus on OTC segment, where revenues and profitability are seen to be better. The company has a debt of around Rs 1,300 crore, almost double its market capitalisation of Rs 726 crore.

GlaxoSmithKline, Carlyle Group and Pfizer were also reportedly in the race for acquiring the domestic drug maker. Such a buyout is likely to help Sanofi India expand its reach in the domestic generic market, which accounts for more than 90 per cent of the Rs 72,000-crore domestic drug sales.

Elder Pharma down on profit-booking post stake sale rumours

Shares of Elder PharmaceuticalsBSE -2.05 % were down on profit-booking, a day after massive rally on rumours that the company was in final stages of discussion to sell its domestic business.

The stock had rallied over 13 per cent on Thursday on rumours that Sanofi SA’s Indian arm was close to buy out Elder Pharma’s domestic formulation business.

Elder PharmaBSE -2.05 % got board approval in July for a restructuring of the company’s business through raising capital, hiving off of assets or other strategic options to reduce debt.

The street is abuzz that the Elder Pharmaceuticals may sell its domestic business for around Rs 2,400 crore. The company has a debt of Rs 1,300 crore on its books.

At 10:45 a.m.; the stock was at Rs 359.05, down 1.79 per cent, on the BSE. It touched a high of Rs 377.40 and a low of Rs 351.45 in trade today.