Brooks Steriscience Abandons Proposed Acquisition of OneSource

Merger Between Brooks Steriscience and OneSource Specialty Pharma Shelved

After months of anticipation, the proposed multi-entity merger involving Brooks Steriscience (BSL) and OneSource Specialty Pharma has been put on hold. The decision was made by both companies, citing the interest of various stakeholders, but sources close to the matter reveal that the actual reason behind the shelving of the merger was shareholder resistance.

Brooks Laboratories has a 49 percent stake in Brooks Steriscience Ltd, a joint venture with Steriscience Specialties. The proposed merger was intended to bring about significant changes, with OneSource Specialty Pharma, a contract development and manufacturing organisation, stating that its board decided not to proceed with the merger "in its current form" due to concerns that it was not in the best interest of all stakeholders. Brooks Steriscience echoed a similar stance, stating that the decision was made "in the best interest of all stakeholders."

However, OneSource Specialty Pharma has hinted at the possibility of revisiting the proposal after reaching FY28 milestones. This implies that the company may still be interested in pursuing the merger, but only after certain conditions are met.

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The Deal's Demise: Shareholder Pushback

The proposed merger had a clear strategic and financial rationale. Brooks Laboratories was set to receive a 1.5 percent stake in OneSource in exchange for selling its 49 percent stake in BSL. This restructuring would have also relieved Brooks of corporate guarantees extended for BSL's borrowings. However, shareholders viewed the exchange as highly unfavorable, with concerns that Brooks was walking away from a strategic, high-growth asset before fully capturing the upside.

Sources indicate that management anticipated the deal would be voted down and chose to withdraw rather than face a public rejection. This decision was likely made to avoid the negative publicity that would have accompanied a public rejection of the merger.

Market Reaction

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The Brooks stock has fallen more than 40 percent since the deal announcement in September, reflecting investor discomfort. The stock rose 5 percent on May 14, the day the deal was called off, and extended gains to 17 percent in the following week. On May 25, the stock traded at Rs 56.80 on the BSE.

Note: The table above provides a summary of the market reaction to the merger's announcement and subsequent cancellation.