Ranbaxy Laboratories has dropped its `unbinding bid' to acquire German pharmaceutical company Merck's generic business, reportedly due to over-valuation.

Ranbaxy, which last week held that it was not in a rat race for the acquisition but made an `unbinding bid at a value it considered fair and reasonable', had made it to the second round for the much-hyped deal. The Indian drug maker decided to pull out of the race after valuations were stretched to 6 billion dollars, according to industry sources.

Even as sources confirmed the reports on Ranbaxy's move, which had enthused its shareholders, the company is yet to make an official statement in this regard.

Earlier, another Indian company Dr Reddy's Laboratories had pulled out of the race citing over-valuation. Ranbaxy was being advised by Goldman Sachs and Citigroup on the deal.

Besides the Indian firm, global pharmaceutical majors including Teva, Mylan and Actavis had made it to the second round for acquiring the generics business Merck. Merck is hiving off its generic unit to concentrate on branded formulations. It sells products in over 90 countries and is the fourth largest generic producer in the world.