Solrex close to triggering open offer in Orchid

MUMBAI: The Ranbaxy Group has come within striking distance of an open offer for Chennai-based drug maker Orchid Chemicals & Pharmaceuticals. Solrex Pharmaceuticals, the creeping acquirer linked to Ranbaxy, has raised its shareholding in Orchid to 14.7%, very close to the 15% threshold that would trigger an offer to the public shareholders.

This signals a decisive move by the acquirer to have a say in how Orchid would be run in the future, either through an outright acquisition or an arm-length strategic influence through board representation. Ranbaxy, as India���s largest drug maker, will benefit from the antibiotics portfolio of Orchid, a strong cephalosporin player with 25 generic drug approvals in the US.

Both the companies declined to comment on the developments. Orchid���s founder and managing director K Raghavendra Rao said he had ���insurmountable barriers��� against talking, while Ranbaxy���s managing director and CEO Malvinder Singh said he wouldn���t comment ���as of now.���

Orchid became vulnerable to an acquisition in the third week of March, when promoter holding fell by about 7.5% to a mere 15.9% due to a panic sell-off. Mr Rao had bought shares with money borrowed from two brokerages, Indiabulls and Religare, the latter incidentally a Ranbaxy group company. When the prices fell, a margin call was triggered but Mr Rao failed to pay. The brokerages sold off the shares pledged to them and recovered their money. In the bargain, Mr Rao lost about Rs 75 crore.

As the share plunged to yearly lows, the previously unknown Solrex Pharma began buying the stock. Market sources connected it to Ranbaxy, but the largest drug firm in India has not yet confirmed it.