Abbott to acquire Piramal's healthcare solutions business

Abbott announced a definitive agreement with Piramal Healthcare Ltd. to acquire full ownership of Piramal's Healthcare Solutions business (Domestic Formulations), for an up-front payment of US$2.12bn, plus US$400mn annually for the next four years, giving Abbott the No. 1 position in the Indian pharmaceutical market. The total consideration works out to US$3.7bn. This further accelerates Abbott's emerging markets growth following the recent acquisition of Solvay Pharmaceuticals and announcements last week of Abbott's collaboration with Zydus Cadila as well as the creation of a new stand-alone Established Products Division to focus on expanding the global markets for its leading branded generics portfolio.

Abbott plans to fund the deal with internal accruals and said that the transaction would not change its earnings outlook for 2010. Piramal's pharma solutions business makes and sells cheaper versions of patented drugs and the unit accounts for more than half of its revenue. Piramal's other interests include contract manufacturing (CRAMS) and pathology laboratories. Abbott said that the combined sales force would be the largest in the industry in India, and forecast that sales in India of more than US$2.5bn by 2020. In September 2009, Abbott bought the drugs unit of Belgium's Solvay for €4.5bn. This month, Abbott entered into a licensing agreement to commercialize products of India's Zydus Cadila in 15 emerging markets, in a bid to accelerate Abbott's growth in emerging markets.

Piramal Healthcare will remain in the industry and invest in remaining businesses, Chairman Ajay Piramal said. The stock was highly volatile this week, rising sharply on speculation of a possible stake sale by the promoters, but the rumours were later denied by the Piramal family. Reports had suggested that Sanofi-Aventis, Pfizer and GlaxoSmithKline could be possible buyers of the founders' stake in Piramal Healthcare. Shares of Piramal Healthcare ended at Rs502 on the BSE on Friday after touching a day's high of Rs599.90 and a day's low of Rs488. On the other hand, Abbott India shares closed at Rs1,096, up 3.7% over the previous day's close. It also cooled down from the day's peak of Rs1,210.