Shares of JB Chemicals & Pharmaceuticals fell over 6% to Rs 1,681.90 on BSE on Monday after global investment firm KKR announced it would sell its 46.39% stake in the company to Torrent Pharma. The deal values JB Pharma at Rs 25,689 crore on a fully diluted basis.
Following the acquisition, Torrent plans to merge JB Chemicals with itself. The deal has been signed at Rs 1,600 per share, which is about 11% lower than JB Chemicals’ Friday closing price of Rs 1,799.35.
Torrent has also made a mandatory open offer to acquire up to 26% of JB Pharma from public shareholders at an offer price of Rs 1,639.18, which is about 9% lower than Friday’s closing price.
After the acquisition announcement, Nomura and Motilal Oswal maintained neutral ratings on Torrent Pharma, while HSBC reiterated its buy call.
“The acquisition will not be a surprise to us, as inorganic expansion, particularly in India, has been a key strategy for TRP in the past. Investors are likely to take comfort that TRP has been successful in past acquisitions, as they have been value accretive. The company’s acquisition template in India is well established. TRP gains cost synergies in the near term, with potential revenue synergies in the long run. In the case of JBCP, the India product portfolio is complementary to that of TRP, in our view,” Nomura said, giving a target price of Rs 3,580 on Torrent.
Motilal Oswal noted that the acquisition would be value accretive for Torrent, supported by a diversified branded portfolio comprising multiple potential mega brands, pan-India presence through a strong medical representative (MR) field force of 2,800, manufacturing capabilities across diversified dosage forms, and a lozenges-led CDMO business.
“We value TRP at 38x 12-month forward earnings to arrive at a price target of Rs 3,430. While the deal is positive, we reiterate our neutral rating on the stock due to limited upside from current levels,” Motilal Oswal said.
HSBC, on the other hand, has a target price of Rs 3,775 on Torrent. The stock was trading marginally higher at Rs 3,361.20 on BSE.
Following the acquisition, Torrent plans to merge JB Chemicals with itself. The deal has been signed at Rs 1,600 per share, which is about 11% lower than JB Chemicals’ Friday closing price of Rs 1,799.35.
Torrent has also made a mandatory open offer to acquire up to 26% of JB Pharma from public shareholders at an offer price of Rs 1,639.18, which is about 9% lower than Friday’s closing price.
After the acquisition announcement, Nomura and Motilal Oswal maintained neutral ratings on Torrent Pharma, while HSBC reiterated its buy call.
“The acquisition will not be a surprise to us, as inorganic expansion, particularly in India, has been a key strategy for TRP in the past. Investors are likely to take comfort that TRP has been successful in past acquisitions, as they have been value accretive. The company’s acquisition template in India is well established. TRP gains cost synergies in the near term, with potential revenue synergies in the long run. In the case of JBCP, the India product portfolio is complementary to that of TRP, in our view,” Nomura said, giving a target price of Rs 3,580 on Torrent.
Motilal Oswal noted that the acquisition would be value accretive for Torrent, supported by a diversified branded portfolio comprising multiple potential mega brands, pan-India presence through a strong medical representative (MR) field force of 2,800, manufacturing capabilities across diversified dosage forms, and a lozenges-led CDMO business.
“We value TRP at 38x 12-month forward earnings to arrive at a price target of Rs 3,430. While the deal is positive, we reiterate our neutral rating on the stock due to limited upside from current levels,” Motilal Oswal said.
HSBC, on the other hand, has a target price of Rs 3,775 on Torrent. The stock was trading marginally higher at Rs 3,361.20 on BSE.
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