Mumbai, May 22 : After much speculation, it was dark horse Abbott Laboratories that emerged suitor for Piramal Healthcare’s Rs 1,823-crore domestic formulations business.
The sale catapults the US drug-maker Abbott into No 1 position in the Indian market, even as it brings Rs 17,000 crore into Piramal Healthcare’s kitty.
Of the total $3.72-billion deal, $2.12 billion will be paid on closing the transaction, expected by the second half of this year, said the Piramal Group Chairman, Mr Ajay Piramal, at an impromptu pressmeet in the corridors of the 10th floor of Piramal Towers.
The remaining payment is staggered at $400 million every year for four years, he said, adding that it was definite and not dependant on performance.
Promoters have not sold their equity in Piramal Healthcare, he reiterated, adding that the deal treated all shareholders “on an equal footing.” Explaining the rationale behind selling the domestic formulations business, described by some as a “golden goose”, Mr Piramal told Business Line that it “had the potential to fly and spread its wings”, not just in India but also overseas. “And we don’t have that potential (to grow it overseas),” he said, rather candidly.
Piramal Healthcare is now left with business worth Rs 1,700 crore.
For Abbott, the deal strengthens its emerging market strategy, a business that accounts for over 20 per cent of its business. “This strategic action will advance Abbott into the leading market position in India, one of the world’s most attractive and rapidly growing markets,” said Mr Miles D. White, Abbott’s Chairman and Chief Executive.
FUNDING
The company will have to pay long-term capital gains tax of 22 per cent, Mr Piramal said. Funds from the deal will also be used to pay the debt of Rs 1,300 crore, he added. The rest will be used to invest in existing businesses, look at newer areas for growth, as it is a time in India’s history where large sectors look attractive, he said, without giving details.
The funds will also be used to pay a special dividend to shareholders, he added. “This shows that our commitment to remaining in the pharma industry is there,” he said, growing as it is at 25 per cent.
The deal comprises a noncompete clause, where branded generics would not be sold in India and the emerging markets, though the company can continue to sell patented and OTC drugs, he said.
On the payment of two per cent of the consideration amount or Rs 350 crore to Piramal Enterprises (PE), he explained it was because PE had taken on an “onerous obligation” in terms of non-compete and indemnities given on behalf of the company.
–AGENCIES