Eris Lifesciences jumps 4% on acquisition of India branded generics biz of Strides
Eris Lifesciences share price rallied as much as 4.4 percent in morning Monday after the company has signed definitive agreement to buy India branded generics business of Strides Shasun.
Strides Shasun share price also gained more than 4 percent.
Eris has acquired generic business for an aggregate cash consideration of Rs 500 crore. The transaction is subject to customary closing conditions and parties intend to close the transaction by November 30th, 2017.
Strides’ India branded generics business comprises of a portfolio of 130 plus brands in the domains of neurology, psychiatry, nutraceuticals and gastro.
As per the terms of the agreement, Eris will acquire the marketing and distribution rights for the said portfolio of products in India, along with the employees forming part of the business. Strides will retain the global rights to the products.
The acquisition is Eris’s fourth—and the largest–in the last 18 months, the company will be among the top ten companies in the central nervous system (CNS) segment.
Eris is already among the top 20 companies in the cardiology segment and ranks among the top ten in the diabetology segment.
Meanwhile, Credit Suisse has an outperform call on Strides Shasun with a target price of Rs 1,000 per share as net debt/EBITDA will reduce to 2.8x from 3.3x.
India business exit came as a surprise while Eris deal is EPS neutral to accretive, it said.
Macquarie has also maintained its outperform rating on Strides with a target price of Rs 1,100, citing likely debt reduction.
“The deal will pare down debt by Rs 400 crore and reaffirmed management focus on core US Australia, Africa and institutional business,” it said while expecting earnings momentum to accelerate in FY19 as rate of product approvals picks up.
Positives are higher focus on B2C business, market share gains in the regulated markets and robust compliance track record, Macquarie said. “Strides is one of the top mid-cap picks,”
The research house expects Strides Shasun as an emerging leader that can potentially generate 100 percent return over three years.
At 10:06 hours IST, the stock price of Strides Shasun was quoting at Rs 816.70, up 3.68 percent and Eris Lifesciences was at Rs 605.85, up 3.55 percent on the BSE.