Mumbai, April 16: The Ranbaxy group is reportedly close to forging a strategic alliance with Orchid Chemicals & Pharmaceuticals Ltd.

The latest development diminishes the possibility of a hostile takeover by the Delhi-based entity through an open offer. Solrex Pharmaceuticals, believed to be a Ranbaxy-promoted company, has been mopping up Orchid shares from the open market since late March.

It now has a stake of 14.7 per cent in the Chennai-based pharmaceutical company. Under Sebi regulations, Solrex will have to make an open offer to acquire another 20 per cent of the Orchid Chemicals stock if its holding crosses the 15 per cent threshold.

It is now learnt that Solrex will not raise stake to the 15 per cent threshold. Instead, the Ranbaxy group is keen to forge a strategic relationship with Orchid Chemicals. Such a deal will be beneficial to both the entities: Orchid makes active pharmaceutical ingredients, while Ranbaxy has a strong presence in the US markets.

The buzz is that top officials from both sides are set to meet shortly to hammer out a strategic relationship.

When contacted, an official from Orchid Chemicals denied that a meeting was scheduled. He also refused to speculate whether the negotiations would be held in the near future. Although officials from Ranbaxy had hinted recently that the group did not believe in hostile acquisitions, the stock markets were not convinced.

The Orchid stock surged today on expectations that an open offer was imminent. On the Bombay Stock Exchange, the stock gained 10.7 per cent to end at Rs 319.05.

Bulk deals were also reported on the NSE and the BSE. However, Solrex was not among the buyers. On the BSE, Morgan Stanley alone bought over 8 lakh Orchid shares at a price of Rs 313.69 per share.

The promoters of Orchid, led by K. Raghavendra Rao, now hold around 16 per cent. Sources said Rao was in “talks with institutions” to shore up his stake in the unlikely event that the Ranbaxy group made an open offer.

“Let’s wait and see. It (Solrex stake) may only be a financial investment. In the meantime, we are talking to institutions,” sources close to Orchid said.