Sun-Ranbaxy deal: CCI raises concerns about molecules market

New Delhi: The Competition Commission, which has put the multi-billion dollar Sun-Ranbaxy deal for public scrutiny, said the major issue is whether the combination would result in high market concentration of certain molecules. 

This is the first case of combination where the Competition Commission of India (CCI) has gone for a public scrutiny, the fair trade watchdog's Chairman Ashok Chawla said.  In April this year, Sun Pharma and Ranbaxy had announced a USD 4-billion deal that would create one of the top five largest speciality generics company in the world.  Chawla said the major issues related to the deal are with regard to molecules market. 

"The major issues obviously are that in many of the molecules, the basic building block in the pharmaceutical industry, whether in some of those molecules there is high market concentration which will emerge as a result (of the  consolidation). That is the matter," said Chawla. He was speaking on the sidelines of an event organised by industry body Assocham. The CCI has asked Sun Pharma and Ranbaxy to make public details of their proposed transaction in a ‘prescribed format’ within 10 working days. 

Both companies informed the stock exchanges, on Thursday, about the CCI direction, which comes under Section 29(2) of the Competition Act, 2002. Under this section, if the CCI is "prima facie of the opinion that the combination has, or is likely to have, an  appreciable adverse effect on competition, it shall direct  the parties to the said combination to publish details of the  combination within ten working days of such direction." “Such disclosure needs to be made in such manner, as it  (CCI) thinks appropriate, for bringing the combination to the knowledge or information of the public and persons affected or likely to be affected by such combination.”

In case the CCI finds the deal in the current form could hurt fair competition in the domestic pharma market, it can even direct the companies to divest some assets as a pre-requisite for approval.  Sun Pharmaceutical Industries would acquire Ranbaxy Laboratories in a USD 4-billion deal that includes USD 800 million debt. The transaction has valued Ranbaxy at 2.2 times its USD 1.8 billion revenue for 2013, or about Rs 457 per share. The deal was approved last month by leading stock exchanges BSE and NSE.