Why is Aurobindo Buzzing Up? Possibility of Open Offer From Blackstone

Promoter History/background :

The Hyderabad-based family of promoters of V Ramprasad Reddy and K Nityanand Reddy currently own 51.8% of Aurobindo Pharma (NS:), a vertically integrated manufacturer of pharmaceutical formulations, established in 1986. Its current market capitalization is 37,514.72 million rupees (as of Friday). The rest is in the hands of public and institutional investors.

What is the buzz since today morning?

Black stone has emerged as the favourite to acquire the wholly-owned injectables arm of Aurobindo Pharma valuing the deal at around ₹26,000-30,000 crore ($3.4-4 billion), making it possibly the largest deal in the space, multiple sources familiar with the potential transaction said.

Let us understand a bit more:

– Blackstone (NYSE:) plans to inject around Rs 2,600-3,000 crore as principal capital into the company instead of an 8-10% stake.
– Eugia’s shareholding will be similar to that of the parent company Aurobindo. – The promoters will then sell a 15-20% stake to the new incoming investor, who will also launch an open offer for an additional 25% of the company.
– If the open offer is fully successful, Blackstone may end up owning 51-55% of the company for extra 15+ billion rupees ($1.8+ billion).

Conclusion:

– The change of control will take place contractually, with the promoter waiving its rights over the composition of the board.
– We can also see the appointment of the main directors and other preferential subscription rights which can/will provide a positive shift of paradigm in the forthcoming quarter helping the stock to cross the 52 weekly high.

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