Ranbaxy has submitted a bid for the generic drugs business of Germany’s Merck that would make it the world’s third-biggest manufacturer of copycat medicines.

India’s largest drugs-maker by revenue said that it had made an offer at a “fair and reasonable” price, but dismissed reports of a $6 billion (£3.1 billion) price tag as “speculative and incorrect”.

The Merck division has been valued by analysts at between $5 billion and $7 billion.

Ranbaxy is expected to face strong competition from European private equity firms as well as other generic drug makers including Novartis, Stada of Germany, Teva Pharmaceutical Industries of Israel, Actavis of Iceland and Cipla, a Bombay-based group, which said it had also submitted a bid as part of an unnamed consortium.

Ranbaxy is among the top ten producers globally, but Malvinder Mohan Singh, the chief executive, has ambitions to launch it into the top five by 2012.

Ranbaxy, which is also listed in Luxembourg, has a presence in 49 countries and earns 80 per cent of its revenues outside India. A third of its shares are held by foreign institutional investors. Its products, available in more than 125 countries, are used to treat a range of complaints including diabetes, respiratory illnesses and allergies.

“We are looking to evaluate the asset and we are going to be practical about it,” Mr Singh said. “We are not in a race for acquisitions but are focused on creating value for our shareholders in the best way we can.”

The move to acquire Merck’s generics unit underlines the new found confidence among Indian chief executives as they look overseas for ways to build their businesses.

Ranbaxy lost out last year to rival Dr Reddy’s Laboratories in the race for Betapharm Arzneimittel, which was sold for €480 million. Dr Reddy’s has already withdrawn from the Merck bidding process because it considered the price too high.

Ranbaxy believes its strength in research and development and its low-cost, high-quality manufacturing facilities will give it the edge over competitors in the pharmaceutical industry as improvements to life expectancy and growing healthcare deficits prompt governments to seek cheaper drugs.

Merck, which employs 29,000 people, has been separate from New Jersey-based Merck & Co since the end of the First World War.

The German company said last year that it was considering selling its generics business to help it to cut debt from its $13.3 billion acquisition of Serono and to focus on high-margin branded products. The unit’s sales in 2006 rose 6.9 per cent to $2.4 billion. Merck declined to comment.

Medicine chart

9 countries in which it has manufacturing facilities

125 countries its products are available in

1973 company listed in India

$1.34bn global sales in 2006

80% sales in overseas markets

15 acquisitions since 2004

Source: Times archives

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