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Hurdle to Sun-Ranbaxy merger

Bitter pill

Mumbai, April 29: The merger of Ranbaxy Laboratories with Sun Pharmaceuticals Industries has received a setback with the Andhra Pradesh high court asking both the BSE and the NSE to withhold their approval for the proposal as it hears a petition alleging insider trading in the Ranbaxy scrip.

The high court has issued orders to the stock exchanges to maintain interim status quo on the matter. It has also issued notices to the Securities and Exchange Board of India, the BSE, the NSE, Sun Pharma, Ranbaxy, Daiichi Sankyo and Silver Street Developers — a limited liability partnership firm having two Sun Pharma subsidiaries as partners.

“There shall be interim status quo, as prayed for,” Justice P. Naveen Rao said in his order.

This followed a writ petition filed by some individual investors alleging heavy trading in the Ranbaxy stock before the merger with Sun Pharma was announced on April 6.

The petitioners had requested the court to direct market regulator Sebi to investigate the insider trading of Ranbaxy shares and take appropriate action against Sun Pharma and Silver Street.

“We have not received any such communication. At Sun Pharma, we hold ourselves to the highest standards of corporate governance and business ethics. Our code of conduct serves as a compass that guide the actions of our employees and directors ensuring consistent and uncompromising integrity as we build trusted relationships around the world,” a spokesperson for Sun Pharma said.

“The matter related to the purchase of shares of Ranbaxy Laboratories does not violate insider trading rules. With regards to the petition filed, the matter is sub-judice and hence we cannot make specific comments but we would be taking appropriate action as advised by our legal counsel,” the spokesperson added.

The petitioners also requested the court to “restrain” the BSE and NSE from giving any clearance to the scheme of amalgamation or merger of the two drug makers.

“However, the extensive and sudden rise in the share price of Respondent 5 (Ranbaxy) prior to announcement of merger clearly demonstrates that certain persons had prior information about the said merger. Consequently the trading on the said shares amounts to violation of Sebi’s Insider Trading Regulations,” the petitioners alleged.

Sun Pharma had earlier denied insider trading charges against Silver Street Developers LLP — its wholly owned arm — in the $4-billion deal to acquire Ranbaxy.

Silverstreet Developers had bought Ranbaxy shares amounting to a 1.41 per cent stake by the end of December 2013. As on March 31, 2014, its holding stood at 1.64 per cent.

Mumbai-based Sun Pharma had on April 6 announced that it would fully acquire Ranbaxy in an all-stock transaction with a total equity value of $3.2 billion, along with debt of $800 million, taking the overall deal value to $4 billion.

 
 
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