Zydus Group companies, German Remedies and Recon Healthcare have been decided to merge into the group's flagship company - Cadila Healthcare. With this landmark decision taken by the Zydus Board, Cadila Healthcare will become a single largest pharmaceutical entity of the group. The company turnover after the merger would cross Rs. 1030 crore mark, with a profit of over Rs. 110 crore, according to the current working of the group companies.

Post merger, Cadila Healthcare will be the fourth largest pharmaceutical company in India, with a market share of 3.82 per cent and the presence in important therapeutic areas, like gastroenterology, cardiology, antibiotic and anti-bacterial, pain management, biotech and vaccines, CNS, respiratory, female healthcare and contrast media.

Citing rationale for this decision Pankaj R. Patel, chairman and managing director, Zydus Cadila, said that it is in consonance with the International best practices and the group philosophy, the Board has decided that there should only be one single listed entity in the group. "Especially with respect to companies in similar, competing lines of business. This merger would maximize value of shareholders of both the companies and achieve complete alignment of interests," he added.

He maintained that the key determinants for success in the global pharmaceutical sector are size, scale and integration of operations. Keeping in line with these global trends and to achieve greater financial strength and flexibility, Zydus group has taken this historical decision of strategic importance.

According to Patel, German Remedies would bring potential strategic value to Zydus Cadila at a time when the group is poised to make a big leap forward in its aspirations to be one of the top three healthcare companies in India and become a leading Asian player by 2010 and a global player by 2020.

Zydus Cadila has already embarked upon its ambitious research programme and the merging of German Remedies into the Zydus fold will bring in increased scale of operations, new products and new therapeutic segments, besides adding value by its association with global pharma majors, like Schering A.G. and Boehringer Ingelheim, said Patel. Zydus Cadila will also have access to the new product pipelines of these MNCs. This would be a crucial factor for the success of pharmaceutical companies in India in the post 2005 era, he added.

The Zydus Group in the post merger time would have tremendous benefits of economies of scale, besides synergies through integration of resources in the areas of supply chain management cost management, asset rationalization and capacity utilization. Post merger, Cadila Healthcare will have a strong brand equity having 14 brand (adding four more brands from German Remedies Ltd.) in the top 300 pharmaceutical brands of the country.

The merger envisages that the combined business of the amalgamated companies will be put to use for fuelling better growth, autonomy and operational focus for the group. This should result in better business momentum and help in leveraging German Remedies inherent strengths for Zydus Cadila.

However, having realized the distinct brand equity of German Remedies and in order to derive benefits of brand equity as well as working style of the company, it has been decided to maintain German Remedies Specialties Limited as an independent business unit within the Zydus fold. German Remedies Specialties is currently a 100 per cent subsidiary of German Remedies Ltd., which will become a 100 per cent subsidiary of Cadila Healthcare Ltd.

Likewise it has also been decided to maintain Recon Healthcare's identity. Currently, Recon Healthcare is a 100 per cent subsidiary of Cadila Healthcare. Cadila, together with Recon, holds 77.37 per cent equity capital of German Remedies. Under the proposal of merger, both Recon Healthcare and German Remedies will be merged with Cadila Healthcare. Simultaneously, two other 100 per cent subsidiaries of Cadila Healthcare such as Zoom Properties and Zydus Pathline will also be merged.