Ranbaxy acquires a hub in Europe

NEW DELHI: Having lost out in the race to acquire Germany’s Betapharm Arzneimittel GmbH last month, Ranbaxy Laboratories appears to be making up with gusto.

Within a span of two days, India’s largest pharma firm has announced as many acquisitions in a bid to consolidate its European footprint.

On Wednesday, the company said it will buy 96.7% stake in Romania’s Terapia for $324 million, to benefit from higher prices of generic medicines in Europe.

DNA Money had reported the acquisition move as far back as December 23, 2005.

Earlier on Tuesday, the company said it is acquiring the unbranded generics business of Allen SpA, the GlaxoSmithKline unit.

The Terapia purchase will give Ranbaxy access to two factories and 157 drugs to treat ailments related to the heart and the central nervous system as well as the 60 products the Romanian firm plans to introduce in the next two to three years.

“Terapia should be beneficial for Ranbaxy over the longer term,” said Mumbai-based Ashit Kothari, who helps manage about $800 million in Indian equities at Lloyd George Asset Management Co.

“The key will be how well Ranbaxy manages to integrate the operations of the Romanian company with itself.”

Ranbaxy’s shares gained Rs 13.35, or 3.4%, to Rs 411.15 on the Bombay Stock Exchange.

Terapia had sales of about $80 million in 2005 and is “highly profitable,” Ranbaxy chief executive officer Malvinder Singh  said.

Combining Ranbaxy’s Romanian operations with Terapia will form the biggest generic drugmaker in Romania and one of the five biggest drugmakers in that country, he said.

Ranbaxy, which aims to achieve $2 billion of sales by 2007, is seeking acquisitions in Europe after sales in the US, which comprised 28% of its revenue last year, declined because of competition.

Ranbaxy paid about 12 times the operating profit of Terapia, Singh said.

Terapia’s operating profit margin was more than 35% in 2005, Ranbaxy’s Singh said, declining to provide profit numbers.

The drugmaker plans to make Romania its manufacturing hub for its operations in Europe and countries of the former Soviet Union, Singh said.

Ranbaxy plans to expand capacity at Terapia’s factories to take advantage of lower costs of production.

With inputs from Bloomberg