Abbott Labs to buy Piramal domestic formulation business for $3.72 billion; to become number one drugmaker in India

Fooling all the speculators, US health care major Abbott Laboratories has declared its intention to acquire Indian branded generics drugmaker Piramal Healthcare's Solutions business (Domestic Formulations), for an up-front payment of $2.12 billion, plus $400 million annually for the next four years (for a total of $3.72 billion), and will result in Abbott gaining number one position in the Indian pharmaceutical market.

During the past week there had been strong speculation that France's Sanofi-Aventis and US behemoth Pfizer were vying to buy Piramal, even though the Indian firm denied media reports that its founders were selling a stake (The Pharma Letter May 19), pushing its shares down more than 8%. The stock fell a further 6% to 535.65 rupees on the latest news, while shares of Abbott India surged more than 8.8% this morning.

Abbott says that the transaction will not impact on its earnings outlook for 2010, and the company s plans to fund the deal with cash on its balance sheet. This deal is subject to shareholder approval of Piramal Healthcare and other customary closing conditions, and is expected to close in the second half of 2010.