The Hyderabad based Matrix Laboratories is to merge four companies with itself in its efforts at geographical de-risking of its manufacturing facilities and enhanced transparency and corporate governance practices. The companies are the Rs 28.47-crore Vera Laboratories Ltd (VLL), the Rs 9.2-crore Fine Drugs and Chemicals Ltd (FDCL), Medikon Laboratories Ltd and Calibre Engineering Pvt. Ltd.
The board of the Hyderabad-based pharmaceutical major, which met on Monday, has approved the merger, the Matrix chairman and chief executive officer, N. Prasad said. The proposed merger is subject to approval of the shareholders, the High Court of Andhra Pradesh and other regulatory bodies. The merger would come into effect with retrospective effect from January 1, 2004, he said.
Vera Labs, with a total reactor capacity of about 300 kilolitres in its seven production blocks, has a US FDA and European Regulatory authorities-approved manufacturing facility spread over 33 acres near Visakhapatnam. Since starting commercial production in 1995, it has developed over 30 products, and its customer base in regulated markets includes Watson Pharmaceuticals, Apotex and Lek Pharmaceuticals.
It will be a perfect fit to Matrix's business plans in terms of manufacturing capacity, product profile and effluent handing facilities. Matrix will be one of the largest US FDA-approved active pharmaceutical ingredients (API) manufacturers in the country. The merger of Vera with Matrix would have synergies such as no product overlap and the US FDA facility entailing Matrix to manufacture and supply any additional products without specific product approvals, Prasad added.
Since Vera's manufacturing facility is located in a declared chemical zone with necessary effluent treatment facility of its own, Matrix could transfer some of its difficult manufacturing processes to this unit. It also helps Matrix in terms of geographical de-risking as all the manufacturing locations of Matrix are located in and around Hyderabad.
FDCL' s Kazipally facility is adjacent to two manufacturing units of Matrix and is exclusively handling conversion jobs for Matrix. While the present equity of FDCL is Rs 6.28 crore, Matrix owns about 49 per cent.
Medikon has its sterile formulations facility at Bollaram on the outskirts of Hyderabad. Its equity is entirely owned by Matrix.
Calibre, on the other hand, has a small engineering facility at Jeedimetla catering to the requirements of Matrix. Around 89 per cent of its equity is held by Matrix.
As per the merger ratio worked out by Rambabu & Company, the statutory auditors of Matrix, and approved by the boards of the companies concerned, one share of Rs 10 each of Matrix would be allotted for every 163 shares of Vera, 25 of FDCL, 96 of Medikon and 8 of Calibre, respectively.
The merger scheme provides for cancellation of equity in case of transferee company (Matrix) if it holds the shares of transferor companies, Vera, FDCL, Medikon and Calibre. The total shares to be issued by Matrix in respect of merger net off cancellations would be 4,19,653 shares of Rs 10 each aggregating Rs 41.9 lakh. Of this, Vera shareholders would get 2.91 lakh shares, FDCL shareholders 1.28 lakh shares, Medikon shareholders 202 shares, while Calibre shareholders would not get any shares of Matrix.
The current paid-up equity of Matrix stands at Rs 12.29 crore. The company recently decided to offer Rs 2.25-crore equity in favour of New Bridge and Temasek on a preferential allotment basis. Taking into account the preferential offer and the proposed merger of the four companies with Matrix, the total paid-up equity of Matrix would go up to Rs 14.96 crore.