SUN PHARMA HIKES
US ARM CARACO STAKE TO 60% FOR $42M
Sun Pharmaceutical Industries has hiked
its stake in its US subsidiary, Caraco Pharmaceutical Laboratories
to 60%. The Mumbai-based pharma player entered into an agreement
with two large shareholders of Caraco to acquire most of their
common stock and options for $42m. The acquisition was at
a consideration of $9 per common stock/option, involving a
total outlay of about $42m. The acquisition will be funded
through internal accruals. The agreement will increase Sun
Pharma and its affiliates equity positions in the company
to over 60% from 44% on a fully-diluted basis, including options.
The company's board cleared this investment,
the agreement for which was inked last month with the two
shareholders, to strengthen its base in the high-priority
United States generics market. "We view this as a firm
intent of our long-term interest in the US generic market,
the potential that we see there and the capability of the
management at Caraco to partake of this growth," said
Dilip Shanghvi, CMD, Sun Pharma. Detroit-based Caraco Pharmaceutical
Laboratories develops, manufactures and distributes generic
and private-label prescription drugs to some of the nation's
largest wholesalers, distributors, drugstore chains, healthcare
systems and state and federal agencies.
Sun had first picked up a 30% stake in
Caraco in 1997 and invested about $7.5m in equity and about
$9.6m in loans. This gave Sun a platform to market its products
in the US. At that point the two companies entered into an
agreement, which allowed for the transfer of 5,44,000 shares
of Caraco for each technology transfer made by the latter.
Since 1997, Sun increased its stake in the US subsidiary to
49% through this route. In the September to December quarter
of '03, Sun's holding decreased to 44% when two directors
left the company. Sun had been wanting to increase its stake
in the US subsidiary for a while now but some of members on
the board of Caraco were stalling the process. While the Mumbai-based
company offered six products to Caraco in '03, the latter
has not filed a single abbreviated new drug application with
the US Food and Drug Administration.
Sun subsequently decided to file these
products through its FDA-approved Indian facility.
The transfer of 25 products is still pending
and each of these transfers will lead to Sun getting an additional
5m shares in Caraco. Of these, one more was filed in December
and seven more filings are expected to be complete this year.
For the year '03, Caraco recorded a turnover
of $45m, registering over a 100% increase from $22m in '02.
For this year, the company has said that it is expecting a
22-25% growth rate.
