Ranbaxy Laboratories Ltd., the India-based pharmaceutical company that has its U.S. sales and marketing office in Jacksonville, agreed to a buyout last week that will create the fifth-largest generic drug company in the world.
Sun Pharmaceutical Industries Ltd., another India-based drug company, agreed to buy Ranbaxy for $3.2 billion in Sun Pharma stock and the assumption of debt that will make the total value of the deal $4 billion.
The merged company will have 47 manufacturing facilities across five continents and annual revenue of about $4.2 billion, the companies said.
Ranbaxy, which has its U.S. administrative offices in Princeton, N.J., employs about 50 people at its Jacksonville sales and marketing office. Ranbaxy spokesman Chuck Caprariello said by email last week that it is too early to speculate how the Sun Pharma deal may impact the Jacksonville office.
Ranbaxy generates 29 percent of its sales in the U.S. market while 60 percent of Sun Pharma’s sales are in the U.S. The merged company expects to have more than $2 billion in annual U.S. sales.
Sun Pharma’s U.S. headquarters office is in Detroit and it has several U.S. manufacturing plants.
Ranbaxy has manufacturing facilities in the U.S. but also imports drugs from India, and the U.S. Food & Drug Administration has raised issues about the quality control at some of its India plants.
That includes violations found in January by the FDA during an inspection of a plant in Toansa, India. Ranbaxy said it recently received a subpoena from a U.S. Attorney in New Jersey requesting documents related to the plant.
As part of the merger agreement, Daiichi Sankyo, a Tokyo-based pharmaceutical company that currently owns a majority of Ranbaxy’s stock, agreed to indemnify Sun Pharma and Ranbaxy for costs related to the subpoena.
According to news reports last week, Sun Pharma has resolved some quality issues of its own with the FDA, and its experience with that is expected to help Ranbaxy resolve its issues with the U.S. regulator.
Reuters news service reported – citing unnamed sources – that Sun Pharma’s plans include phasing out the Ranbaxy brand name in the U.S.
The merger will require approval from 75 percent of shareholders of both companies. Daiichi Sankyo, which owns 63.4 percent of Ranbaxy’s shares, has agreed to vote its shares in favor of the deal.
The companies hope to complete the merger by the end of 2014.
Analyst sees another rise in Web.com
After a yearlong run in the stock that brought Web.com Group Inc. to a record high in early March, the stock has backed off a bit over the past month. That has one analyst ready for another runup in the Jacksonville-based company’s stock.
Craig-Hallum analyst Mitch Bartlett last week raised his rating on the website services company from “hold” to “buy” and raised his price target from $34 to $40.
Web.com, which reached a high of $37.72 in March, was trading at $31.02 when Bartlett upgraded the stock.
“This past February we downgraded Web.com based on valuation following a tremendous run in the shares,” Bartlett said in his research note.
“Our downgrade had little to do with Web.com’s current fundamentals, but rather that with a Go Daddy IPO (rumored to be coming soon), investors would more thoroughly sort through the competitive landscape and like with many other internet categories, place a high and disproportionate value on the perceived winner and a much lower valuation on smaller competitors,” he said.
“However, with the recent retracement in the shares we are returning to a ‘buy’ rating believing Web.com has solid fundamentals vis-à-vis the competition, is attractively priced, and has good growth opportunities in the coming years,” Bartlett said.
“With growing FCF (free cash flow), stability in the customer base, high subscription based recurring revenues and further debt deleveraging, we also believe Web.com will see multiple appreciation ahead,” he said.
Website hosting company Go Daddy has not filed a registration statement for an initial public offering but has retained investment bankers to manage its IPO, Bloomberg News reported last week.
Two firms buying up Body Central shares
As its stock price plummeted, at least two investment firms took advantage of the low price to buy up shares of Body Central Corp.
The Jacksonville-based fashion retailer’s stock, which traded above $30 almost two years ago, plunged to about $1 in late March after Body Central said its recent losses raise doubt about its “ability to continue as a going concern” if the cash drain continues.
Some people see the low price as a buying opportunity. A Maryland-based investment firm called Lane Five Capital Management said in a Securities and Exchange Commission filing that it acquired 500,000 additional shares on March 28 at 94 cents each, bringing its total investment to almost 1.25 million Body Central shares, or 7.5 percent of all shares outstanding.
In another SEC filing, New Jersey-based Blackwood Capital Management said it has 900,000 Body Central shares, or 5.4 percent of the stock.
Blackwood actually began accumulating shares in February when the stock price was above $3, but it has bought more than 600,000 additional shares since March 25, when Body Central made the announcement and the stock dropped further.
Both firms said in their SEC filings that they have had discussions with Body Central’s management about “operational issues.”
Analysts have said Body Central’s low stock price could make it ripe for a takeover by private equity firms, but neither Lane Five nor Blackwood has a reputation for buyouts. However, Lane Five founder Lisa O’Dell Rapuano does have a strong reputation in the financial world for stock picking.
According to its annual proxy statement, three other investment firms own more than 5 percent of Body Central’s stock.
RiverTown sale impacts St. Joe finances
With the sale of the RiverTown development in St. Johns County completed, The St. Joe Co. last week said in an SEC filing that the deal, plus another major sale completed in March, had a big impact on its finances.
Mattamy Homes completed the acquisition of the 4,057-acre RiverTown community on April 2 for $24 million in cash and a $19.6 million purchase money note.
That followed St. Joe’s sale in March of 380,000 acres of timberland in the Florida Panhandle for $359 million in cash and $200 million in notes.
St. Joe had reported 2013 revenue of $131.3 million and net income of $4.99 million. However, in last week’s SEC filing, the company said if those two deals had been completed before the end of 2012, St. Joe would have reported $100.4 million in revenue for 2013 and a net loss of $3.4 million.
On the bright side, the sales would have increased the amount of cash on St. Joe’s balance sheet from $21.9 million on Dec. 31, as it said in its annual report, to $393.5 million if the sales had been completed.
St. Joe also said it could receive an additional $20 million to $26 million in impact fees over the next five years from Mattamy, based on the timing of Mattamy’s development of RiverTown.
Stein Mart sales up in March
Stein Mart Inc. last week reported total sales rose 0.7 percent in the five weeks ended April 5 to $136.3 million, and comparable-store sales rose 0.9 percent.
Comparable-store sales are sales at stores open for more than one year and are a key indicator of a retailer’s performance. The Jacksonville-based fashion retailer operated 263 stores at the end of March, compared with 262 a year earlier.
Stein Mart said sales in early March were impacted by cooler than normal weather in much of the country, a continuation of the trend that affected winter sales for many retailers. However, March sales also were impacted by the shift in the Easter holiday from March to April.
As Stein Mart has said in the past, because of the year-to-year shift in the Easter holiday, it is generally more relevant to look at March and April sales combined to evaluate the company’s performance.
Avondale Partners analyst Mark Montagna said in a research note that he was expecting higher comparable-store sales in March and as a result, he lowered his first-quarter earnings estimate by 2 cents a share to 31 cents.
“While we are lowering our first-quarter EPS and flowing that through our fiscal year-end estimates, this does not diminish our positive outlook,” he said.
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