Mumbai, July 23: Matrix Laboratories and Strides Arcolab today called off their merger plan due to differences over valuation.
The proposed merger, which was being touted as another instance of the growing consolidation in the Indian pharmaceutical industry, would have created the country’s seventh largest drug company by value.
Matrix Laboratories and Strides Arcolab said the proposed merger, which was approved in principle by the boards of both the companies at their meetings on June 1, had been called off because “the two companies were unable to reach an agreement on valuation”.
In their in-principle agreement announced in June, Matrix and Strides had said the combined sales of the two companies for the 12-month period ended March 2005 stood at over Rs 1,000 crore and net profit was in excess of Rs 170 crore.
The merged entity was proposed to be named Matrix Strides. Had the merger worked out, Matrix Strides would have operations in over 70 countries with manufacturing operations in India, the US and Latin America.
In a joint statement, Matrix chairman N. Prasad and Strides CEO Arun Kumar said the intention of merger was based on a strong business strategy and the potential benefits of integration.
“However, while it is unfortunate that an agreement could not be reached on valuation, both the companies recognise and will harness the strategic relationship envisaged in the rationale of the merger,” they added.
Though the merger has been called off, Matrix and Strides will combine their strengths for mutual benefit while continuing to grow their businesses independently.
In line with this beneficial business objective, Strides will license a range of hospital products to Docpharma, which was recently acquired by Matrix for Benelux markets (Belgium, the Netherlands, and Luxembourg).
On the other hand, Matrix intends to strengthen the co-operation agreement in the anti-retro viral (ARV) field by enhancing the scope of the present understanding.
While Strides Arcolab produces finished dosages and has a major position in softgels, Matrix Labs is an active pharmaceutical ingredient (API) maker.
Notwithstanding the setback to this merger, pharma analysts contend that consolidation in the industry is an imperative, as companies need to have an integrated structure of operations ? from APIs to finished formulations ? to compete in the overseas markets.
“Suitors, both from within and abroad will continue to look at API players in the country,” an analyst said.
It was only in March this year that Glenmark Laboratories Ltd (GLL), an unlisted company, amalgamated with TASC Pharmaceuticals Ltd.