At the brink of a takeover ; The Orchid - Ranbaxy saga

When Mr Raghavendra Rao of Orchid Pharmaceuticals completed the formalities of its new subsidiary Orchid Japan KK and started relaxing, he was in for a shock. A particular syndicate of investors led by Solrex Pharmaceuticals had started gathering the Orchid shares and Orchid was at the brink of a takeover.

Solrex is believed to be backed by the promoters of Ranbaxy. A look into the recent trading of Orchid shares showed conclusively the way Solrex is buying in last 3-4 months. Solrex bought close to 3.5% recently when a major institutional promoter (Bear Stearns) of Orchid liquidated its holdings in March. That buy-out ups the total holdings of Solrex close to 12%.

Soon everyone figured out the happenings in backdrops and entered the frenzy in market. This resulted in Orchid witnessing 52 week high and lows in less than a month. The price of Orchid on March was a 52-week low of Rs 127.30, and on April 16, it closed at Rs 319.70, after scaling a 52-week high. But the silence from Ranbaxy about the takeover rumours, made the shares to loose the recent gains and it was around Rs 280 on April 19th. A high volatility observed in intra-day trading for the last couple of days.

All Ranbaxy had to say was “We don’t believe in hostile takeovers”. Ranbaxy states this as just another strategic investment like the ones they have in Jupiter Biosciences, Krebs Biochemicals and Zenotech laboratories.

This acquisition will, in all probability lead to a spate of acquisitions in the coming days. Unlike the western countries, Indian Pharma market is widely distributed in tens of thousands of small, family-owned companies, with no monopoly whatsoever. This is going to change soon with biggies entering the market with acquisitions & mergers.

Ranbaxy has lot to gain with this acquisition by taking control of impressive API cephalosporins market of Orchid, FDA approved manufacturing facilities and R&D centers. Orchid has more than 25 FDA approved ANDAs and many in the process. Highly experienced Mr.Rao is less likely to yield to pressure. In all probability he will look out for strategic investors to tide through the crisis.

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  1. Anonymous says

    nice blog!