Abbott Agrees to Buy Piramal

Chandrasekhar Atreya
22 May, 2010
New York City

Abbott Laboratories enters into a definitive agreement with Piramal Healthcare to buy its generic branded business in an all cash deal of $3.7 billion. This deal will make Abbott the largest drug company in India with 7% share of the market.

[R]Abbott Laboratories enters into a definitive agreement with Piramal Healthcare to buy its generic branded business in an all cash deal of $3.7 billion. This deal will make Abbott the largest drug company in India with 7% share of the market.[/R]

Abbott Laboratories has agreed to purchase the Indian drug maker Piramal Healthcare’s generic branded business in a definitive agreement for $3.7 billion, (Rs 17,500 crore) increasing its presence in the fast-growing emerging markets with its portfolio of low-priced drugs.

Piramal would get $2.12 billion upfront in cash, in the second half, followed by $400 million annually over the next four years. Illinois-based Abbott Park would pay the cash.

The assets in the sale include manufacturing facilities at Baddi, Himachal Pradesh and the rights to 350 brands and trademarks. The sale will also involve the transfer of around 5,500 employees.

Abbott plans to operate the Piramal unit as a standalone business reporting to its established products division. Revenue will rise 20% a year reaching more than $2.5 billion by 2020.

The sale is conditional upon Piramal shareholders’ approval and closing conditions. Piramal and Piramal Enterprises and associates have agreed that for eight years following the closing, the company will not engage in the business of generic pharmaceutical products in finished form. However, Piramal is free to continue its retained businesses. The transaction does not have any commitment from Abbott to buy/source from Piramal.

All the cash from the deal will go into Piramal Healthcare and will be invested in existing business segments such as consumer healthcare or the OTC unit, the critical care segment and drug research, chairman Piramal said.

When Piramal’s operations in India are combined with Abbott’s existing business there, the company will become the largest drug company in India with 7% of the market, company executives said.

In India drug sales are expected to hit $8 billion and double by 2015. Consumers in emerging markets often pay directly for their prescriptions, rather than relying on insurance or government care and generic drugs are the biggest sellers in these markets.

Piramal shares shed 11.81% to close at Rs 502.35 on the Bombay Stock Exchange. Abbott gained 46 cents or 1% to $46.94 at 4:01 p.m. in New York Stock Exchange.

Abbott was advised by Morgan Stanley on the acquisition.