The Mumbai based pharmaceutical company Arch Pharmalabs will soon acquire Avon Organics Limited. Avon Organics has passed a resolution in this regard to allot equity shares on a preferential basis to Arch Pharmalabs Limited at an undisclosed price. The preferential issue, together with the open offer to the public shareholders of Avon, is expected to result in a majority stake for Arch Pharmalabs and effectively transfer management and operational control to Arch Pharmalabs Ltd.

Avon Organics Limited is a Hyderabad based company with two manufacturing sites. The Sholapur site has been inspected successfully by the US FDA recently and the Hyderabad site is a specialised site for intermediates. The company has been recently reporting losses owing to intense competition from China for one of its main product groups resulting in financial stress.

For Arch Pharmalabs, the acquisition makes sense owing to the US FDA status at one of the sites and also the possibility to sweat the assets at the intermediates site. "The Avon acquisition will help us in our backward integration strategy", said Ajit Kamath, chairman and managing director of Arch Pharmalabs Ltd. "The US FDA status will help Arch to fast forward a few product launches in the US and the intermediates plant will serve as a key sourcing base for a couple of our products which are currently market leaders in their category. We are confident of restructuring the operations, invest in assets and achieve a turnaround soon", he added.

Welcoming the development, Rajesh Agarwal, executive director of Avon Organics Limited commented, "The entry of the Arch management in our company will facilitate our various product group sales and will also help us to engage in much needed expansion to exploit the potential at each of our sites". He added that "Certain products and the positioning of both the companies will help unleash synergy across all functions".