Today Sun Pharmaceuticals announced its acquisition of Ranbaxy Laboratories through an all-stock merger for $3.2 billion. According to the deal details, Ranbaxy shareholders will get 0.8 shares of Sun Pharmaceutical for every Ranbaxy share held by them. Going by the last closing price of Sun Pharma, Ranbaxy investors will get Rs 457 apiece which is at a premium of 18 per cent to Ranbaxy's 30-day volume-weighted average share price of Rs 387 and a premium of 24 per cent to Ranbaxy's 60-day volume-weighted average share price of Rs 368.
So far so good, but there is a something that the regulator needs to worry about. The quoted merger price was surpassed by the Ranbaxy stock on April 4, which was continuously rising over the previous four trading sessions. Effectively, even before the announcement was made public, the Ranbaxy price touched Rs 462, surpassing the Rs 457 a piece as stated by the settlement. In the process, the Ranbaxy stock went up by 25 per cent on April 4 from the Rs 370 quoted price on April 1. The statistics further get murky when you take the average combined NSE and BSE volume of the Ranbaxy stock for the last three trading sessions which stood at 1.25 crore which is 4 times higher than the six months average traded volume of 35 lakh. The increase in the volume of trades raises suspicions of insider trading in Ranbaxy by the people who were aware of the deal, which was also leaked or gave whiff of likely merger to operators who actively pushed up the prices. For more on the muddy past of Ranbaxy, click here
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