Ranbaxy is the leading drugmaker in India's $26 billion generic pharmaceutical industry, but it has faced penalties from U.S. regulators for years. The U.S. has banned imports of drugs from two of its factories because of concerns about quality control.
The acquisition will allow Sun Pharma to tap Ranbaxy's global network and manufacturing capabilities. The combined company will have 47 factories across five continents and operations in 65 countries, said Dilip Shanghvi, Sun Pharma's managing director.
"In high-growth emerging markets, it provides a strong platform which is highly complementary to Sun Pharma's strengths," Shanghvi said. "We see tremendous growth opportunities."
Sun Pharma said the transaction value includes $3.2 billion in stock and nearly $800 million of Ranbaxy debt. Ranbaxy shareholders will receive 0.8 shares of Sun Pharma for each share of Ranbaxy with an implied value of 457 rupees, a premium of 18% to Ranbaxy's average share price over 30 days.
Ranbaxy shareholders are expected to own 14% of the new company and Ranbaxy's parent company, Daiichi Sankyo, will be the second-largest single shareholder.
Ranbaxy has annual revenue of about $2 billion.
The acquisition is subject to approval of shareholders of both Sun Pharma and Ranbaxy.