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Sun-Ranbaxy deal clears court hurdle

Hyderabad, May 24: The Andhra Pradesh high court today lifted a temporary stay it had imposed on the Sun Pharma-Ranbaxy merger, paving the way for both companies to complete the deal.

Last month, the court had ordered the stock exchanges to maintain an “interim status quo” on the deal, pending a decision on a petition for probe into alleged insider trading.

Individual investors alleged heavy trading in the Ranbaxy stock before the announcement of the merger with Sun Pharma on April 6 and requested the court to direct market regulator Sebi to investigate the matter.

The counsel for Ranbaxy argued that the insider trading allegations and the merger deal were separate issues.

Earlier, Sebi had informed the court that an investigation into insider trading charges was underway.

“Sebi has taken up the investigation and there is no truth of inaction on the regulator’s part as alleged by the petitioners,” Sebi counsel Y. Suryanarayana had told the court.

The judge also said there was no need to continue the status quo as Sebi was already looking into the allegations as sought by the petitioners.

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

Silverstreet Developers, a Sun Pharma subsidiary, had bought a 1.64 per cent stake in Ranbaxy between December and March, prompting investors to allege insider trading.

According to a shareholding disclosure by Sun Pharma to the stock exchanges, Silverstreet had bought these shares as an investment.

“Ranbaxy shares spiked 25 per cent and the volume of trading was up five times in the week preceding the announcement of the Sun-Ranbaxy merger, clearly indicating insider trading by those who had price-sensitive information, defeating the interests of minority shareholders,” Vishnuvardhan Reddy, the counsel representing the shareholders, had alleged in the high court .

The pharma companies involved in the deal had challenged the high court’s order in the Supreme Court.

On May 21, a Supreme Court bench of justices B.S. Chauhan and A.K. Sikri had asked the Andhra Pradesh high court to decide the issue within two days.

Accordingly, the high court had yesterday heard the arguments from the counsel of the petitioners, Ranbaxy, Sun Pharma and Sebi.

The merger process involves securing approvals from the stock exchanges, Sebi, the high courts of Gujarat, Punjab and Haryana, the Competition Commission of India, creditors and shareholders of both companies .

 
 
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