Feb 6, 2001|
Rhone buyback: Pros and cons
The open offer, which Nicholas Piramal made to the shareholders of Rhone Poulenc (Rhone) is still on. Should shareholders of Rhone Poulenc accept it?
Rhone has top of the line brands such as its cough syrup Phensedyl (number two after Pfizer’s Corex), a children’s cough syrup Tixylix, an anti–amoebic Flagyl and an anti–epileptic Gardenil. Secondly, the company has restructured its workforce by reducing its unskilled workers by over 600 people and increased its marketing team by 75 people to 375 medical representatives currently. Third, the company upgraded its Paithan plant (in Maharashtra) by additional investments recently. This helped it reduce the cost of material by nearly 10%. These were the reasons for a host of Indian companies bidding for the company.
As to the question as to why Aventis wanted to sell its stake in the company, the one plausible reason was that Aventis’ pharma operations are prescription led whereas Rhone Poulenc India has over the counter brands such as Phensedyl. Secondly, its French parent (now a part of Aventis) has sold off its older brands and is more interested in therapeutic areas such as oncology where it has got blockbusters such as Taxotere. And finally, there is an overlap in the field force of Rhone Poulenc India and Hoechst Marion. Aventis possibly found it safer to sell the company rather than go through another painful round of restructuring.
For Nicholas it made sense to takeover Rhone. Apart from the fact that the company has had notable over the counter brands, Rhone also has prime properties in Central Mumbai and Ballard Estate. Nicholas had also expanded its capacity in Pithampur (MP) which could be used to manufacture Rhone’s products. Besides, its large field force of over 1,100 people could be used to cross sell Rhone’s products as well.
However, the fact remains that it is only a matter of time (two years at best) till Rhone were to get merged with Nicholas Piramal. And it is the anticipated merger ratio that could well decide Rhone’s valuation in the future. The stock currently quotes at a price of 795, which implies an earnings multiple of 10 times FY01 earnings. The open offer is at Rs 875. It would be better for shareholders to take the open offer, as there is still some uncertainty regarding the merger ratio.
More Views on News
Aug 14, 2017
A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.
Aug 14, 2017
GST impact coupled with price erosion in US leads to lower profits for the quarter.
Aug 8, 2017
Profits plunge due to higher raw material costs.
Jun 23, 2017
Net Profit lower due to exceptional items in the previous year.
May 30, 2017
US markets decline while other geographies grow in the quarter.
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407