ICICI Securities Initiates Coverage on Sun Pharmaceutical Industries, Suggests Target Price of Rs 2000

Sun Pharma to Acquire Organon in $11.75 Billion Deal

Sun Pharmaceutical Industries (Sun) has entered into a definitive agreement to acquire US-based Organon for a total consideration of USD 11.75 billion. The acquisition will see Sun pay USD 3.99 billion in cash to purchase the total outstanding equity at USD 14 per share.

The acquisition is expected to significantly enhance Sun's position in the global specialty market, with Organon's portfolio of 22 brands. It will also strengthen Sun's branded and established generic businesses, while allowing the company to foray into biosimilars (7% of revenue) and venture into new markets like China and South Korea. Furthermore, the deal will cement Sun's position in over 18 countries.

The deal is valued at 1.9x and 6.2x calendar year 2025 (CY25) Enterprise Value to Sales (EV/sales) and Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA), respectively. The combined entity is expected to generate Free Cash Flow (FCF) of USD 2-2.5 billion per annum.

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Sun will fund the acquisition using cash of USD 2-2.5 billion, with further debt of USD 9.25-9.75 billion to be raised. Management expects to realize synergies of USD 350 million in 2-4 years post completion.

Retain Buy Recommendation

We retain our BUY call on Sun, with a higher target price of INR 2,000, valuing Sun's existing portfolio at 28x FY28E EPS (up from 30x earlier) and Organon at 6x CY27E EV/EBITDA.

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