The ABBOTT PIRAMAL MERGER

Abbott Laboratories bought Piramal Healthcare Ltd.s branded genericmedicine unit in India for $3.72 billion, making it the countrys biggest drug
maker and tapping into a market expected to more than double by 2015.

Abbott paid $2.12 billion upfront and $400 million annually for four years from
2011 for the unit, which sells retail-ready pharmaceuticals in India, Sri Lanka
and Nepal. The Abbott Park, Illinois-based company will pay cash for the
transaction, expected to close in the second half of 2015.
The acquisition was the second-largest takeover in Indias health-care industry
and gives Abbott a 7 percent stake in the $8 billion Indian pharmaceutical
market. The move fits into Abbotts strategy of broadening its business beyond
brand-name pharmaceuticals in the U.S. and Europe, where sales are slowing
because of generics competition and pricing pressure from governments.

Reasons:

The ABBOTT PIRAMAL MERGER

Growing Market
In India, the pharmaceutical market is expected to increase as much as 16
percent a year through 2014, according to IMS Health Inc. The $300 billion
U.S. market will grow at a slower rate of 3 percent to 6 percent over the same
period, said IMS.
The slower growth in the U.S. and Europe has Abbott and other drugmaker
turning toward developing countries to increase sales. Tokyo-based Daiichi
Sankyo Co. bought 64 percent of Ranbaxy Laboratories Ltd., Indias largest
drug maker, for about 488.7 billion yen ($5.45 billion) in 2008, the biggest
takeover in the South Asian nations pharmaceutical industry, and Pfizer Inc.
has been licensing products from Indian generic-drug maker Aurobindo
Pharma Ltd.
The Piramal unit Abbott is purchasing is set to have $500 million in sales next
year and will grow at 20 percent a year. Piramals products include medicines
for infections, heart disease, pain, and respiratory conditions.

Scarcity of Assets
There is a scarcity of high-quality assets in this market and belief is Piramal is
among the best. Indian markets are so significant in the future growth of
pharma industry that it was important for Abbott to be there early and in a
meaningfully strong way.
Abbott gained 46 cents, or 1 percent, to $46.94 at 4:01 p.m. in New York
Stock Exchange composite trading. Piramal had dropped 12 percent to close
at 502.75 rupees in Mumbai trading.
Moodys Investors Services said it has placed Abbotts A1 senior unsecured
credit rating under review for a possible downgrade as a result of the
acquisition. It affirmed Abbotts Prime-1 rating.
The U.S. drug maker paid a hefty premium of about 50 percent for the
business, based on Piramals market value, likely because there were other
bidders involved, said Larry Biegelsen, an analyst with Wells Fargo, in a note
to clients.
Standalone Business

The ABBOTT PIRAMAL MERGER

Abbott plans to operate the Piramal unit as a standalone business reporting to
its so-called established products division. After the acquisition, the company
has 7,000 sales representatives across India, more than the 2,500 current
employees in the country.
The unit, called Healthcare Solutions, makes and sells generic medicines for
conditions including respiratory and heart disease in India. Piramals other
businesses include contract- manufacturing and drug-ingredient production.
Sales at the Piramal division making branded generics rose 25 percent to 20
billion rupees ($426 million) in the year ended March 31, the company said on
May 7. The unit accounted for more than half of the drug makers total fullyear revenue.

I dont think we were in a position to take it global. A company like

Abbott has the strength and aspirations to do that, Piramal
chairman Ajay Piramal said. There arent too many markets growing at
25 percent annually and its a good opportunity for Abbott to be in
India, he said.

The ABBOTT PIRAMAL MERGER

Revenue will rise about 20 percent a year, reaching more than $2.5 billion by
2020, Abbott said.