India's Sun Pharma said Saturday it will take "appropriate action"after a court suspended the generic giant's $3.2-billion takeover of troubled rivalRanbaxy while insider trading allegations are probed.The Andhra Pradesh High Court order, dated April 25 but which came to light latethis week, marks a setback to the deal.
The ruling follows a petition submitted by two investors seeking an investigationinto accusations of insider trading in Ranbaxy shares ahead of the takeoverannouncement earlier in the month."The matter is sub judice and hence we cannot make specific comments but wewould be taking appropriate action as advised by our legal counsel," a SunPharmaceutical Industries spokesman said in a statement emailed to AFP.The court ordered that the "status quo" existing before the transaction bemaintained while the movement of the Ranbaxy shares before the April 7 deal arelooked at.Ranbaxy is 64-percent owned by Japanese drugmaker Daiichi Sankyo.The movement in the shares has focused attention on a Sun unit, SilverstreetDevelopers, which bought Ranbaxy shares before the transaction."The matter related to purchase of shares of Ranbaxy Laboratories Ltd does notviolate insider trading rules," the Sun spokesman said in the email.Sun holds itself to the "highest standards of corporate governance and businessethics", the company spokesman added.The investors alleged in their writ petition that some investors knew about themerger ahead of its announcement and profited, breaking insider trading rules.The court has ordered stock exchange regulators not to approve the merger untilquestions about the share movements are answered.The Securities and Exchange Board of India announced separately earlier in theweek it was looking at movements in Ranbaxy stock before the takeoverannouncement.Ranbaxy's shares leapt over 20 percent in heavy trading volume in the days leadingup to the deal after suffering sharp losses in previous years due to long-runningregulatory problems.Last year, Ranbaxy paid a $500-million fine for falsifying drug safety records.Daiichi had struggled unsuccessfully to resolve the Indian company's US regulatorywoes after acquiring Ranbaxy in a 2008 $4.6-billion acquisition.New Delhi-based Ranbaxy is unable to export drugs to its key US market from itsIndian plants due to bans imposed by the US Food and Drug Administration (FDA)over quality problems.
Mumbai-based Sun had said the Ranbaxy purchase would give it a broader range ofdrugs in its medicine cabinet, a robust drug pipeline and a wider geographicalreach.With the purchase, Sun, which has a history of nursing ailing acquisitions back tohealth, would become the world's fifth-largest generics pharmaceutical companyand nearly double its annual sales to $4.2 billion.