In a merger of two India-based pharmaceutical companies, Strides Acrolab Limited, headquartered in Mumbai, and Shasun Pharmaceuticals Limited, headquartered in Chennai, have agreed to merge in all-stock deal valued at about $200 million (Rs 1,228 crore). The boards of directors of both companies have approved the merger. The proposed combination of the two companies would create a vertically integrated pharmaceutical company with combined revenues of $406 million (Rs 2,500 crore), placing it among the top 15 pharmaceutical companies in India.

Commenting on the merger, Arun Kumar, founder and group CEO of Strides, said in a company statement: “Since the divestment of our injectables business, which resulted in significant value creation for our shareholders, Strides has refocused on its oral finished formulation business. Today's proposed combination with Shasun accelerates our strategy and growth prospects by creating a larger scale, fully integrated, leading Indian pharma company with multiple growth drivers and synergies that will allow for enhanced profitability and more efficient use of our combined infrastructure and enhanced value creation opportunities for the combined shareholder group.” In 2013, Strides sold its injectables unit Agila Specialties to US-based Mylan.

The combined company would have a finished dosages portfolio in niche and complex domains with a pipeline of more than 100 products and a combined R&D staff of more than 400 personnel. The companies also said the proposed combination “de-risks” its manufacturing operations by adding scale. The combined entity would have 12 manufacturing facilities, including three US FDA-approved finished dosage manufacturing facilities, two US FDA-approved API manufacturing facilities, one US FDA-approved contract research and manufacturing facility, and six manufacturing facilities catering to the emerging markets. The move would also leverage Shasun's active pharmaceutical ingredient (API) manufacturing capacities and allow a shift to niche APIs aligned with the combined company's finished dosages portfolio and pipeline.

Under the deal, each equity shareholder of Shasun will be entitled to receive five equity shares of Strides in lieu of sixteen equity shares held in Shasun. Based on the exchange tatio, Shasun shareholders will own 26% of the combined entity. Strides and Shasun will have the right to nominate members to the combined company's board of director in proportion to their respective stakes in the combined company. The scheme of amalgamation is subject to the approval of the companies' shareholders, relevant stock exchanges, and governmental approval. The appointed date for the scheme of amalgamation is April 1, 2015, and the transaction is expected to close by June 2015, subject to receipt of all approvals.

The deal is reflective of increased consolidation in India's pharmaceutical industry. In April 2014, Sun Pharmaceutical agreed to buy Ranbaxy Laboratories for $3.2 billion.

In a separate move, Strides also announced that Jordan-based GMS Holdings will acquire a 25.1% stake in its biotech arm Stelis Biopharma for $21.9 million. The transaction is expected to close in the fourth quarter of 2014 and is subject to customary closing conditions, regulatory and corporate approvals, as may be required.

Source: Shasun and Strides Acrolabs