By Priya Nigam
“Consolidation” has been the name of the game across the world this year. The news so far in 2008 has been dotted by mergers and acquisitions. Despite the US credit crisis and the tight global financial situation, the value of M&A deals this year has surged passed the $1 trillion mark. Closer to home, however, the story has been different. In India, the value of M&A deals has plummeted almost 72% year-on-year. This is notwithstanding Tata Motors Ltd’s offer to take over Jaguar and Land Rover from Ford Motor Co.
Another interesting deal in the Indian market involves the offer to buy a 73.3% control of oncology major Dabur Pharma. The company has announced that its promoters (the Burman family) and certain other stockholders have agreed to sell their shares to Singapore-based Fresenius Kabi Pte Ltd for Rs76.50 per share. Fresenius Kabi is a 100% subsidiary of the $12 billion German healthcare group Fresenius SE. The deal, which costs the global giant Rs878.2 crore, values Dabur Pharma at about Rs1,198.8 crore. Regulatory approvals are still pending.
Following the sale of its non-oncology business for Rs159 crore last year, Dabur Pharma is now fully focused on oncology and has a presence in over 40 countries. The deal marks the Burman family’s exit from the oncology segment.
Now Fresenius Kabi has made a public offer to purchase another 20% stake in the Dabur Pharma. The price remains the same, at Rs76.50 per share in cash. What does this mean for shareholders? If you are holding Dabur Pharma shares, here are some points you should consider:
The offer price is not very much higher than what the shares were trading at prior to the announcement of the public offer.
Dabur Pharma has a healthy pipeline of drugs.
The company has about 12 ANDA (Abbreviated new drug application) filings in the US.
Dabur Pharma is a focused company.
It focuses on a high-margin segment.
There are only a handful of generic players in this segment.
The Economic Times quoted Dabur Pharma’s founder and director Anand Burman as having said in an excusive interview that the deal would “expedite the growth of the company.” Fresenius Kabi has announced that it has plans to invest around $70 million in expanding its activities in India.
The first three months of the year have been quite something for Dabur Pharma shares. They jumped to a high of more than Rs92 in January only to decline steadily to a notch above Rs48 in mid-March.
To me the offer price seems a little too low. After all, Dabur Pharma is a domestic major in an attractive segment and that too with a good management team and the prospect of some ANDAs materializing. I would really think twice before rushing into tendering shares for anything below Rs90.
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1 comments:
How do you come at the figure of Rs 90 ???
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