The merger of Indian companies Strides Arcolab and Shasun Pharmaceuticals has hit a roadblock as the country's foreign promotion board rejected the proposed shareholding structure of the deal.
Analysts said the June 17 ruling was not a complete deal breaker after the overall merger was approved in March but does represent a hurdle to completion.
Specifically, India's Foreign Investment Promotion Board (FIPB) rejected a proposal for issuing Strides shares to shareholders of Shasun Pharma under the scheme of a merger. The exact wording of the order was not immediately available on the board's website.
However, a blog by Capital Mind said the companies needed FIPB approval "in order to issue shares of Strides to Shasun shareholders that were non-resident. Shasun has about 21% ownership by Foreign investors, which will, post the merger, translate to just 5% of shares in Strides."
In March, the Competition Commission of India approved Strides Arcolab buying Shasun Pharmaceuticals in a $200 million deal, ruling the combination was not likely to have any appreciable adverse effect on competition in India.
The same month, Shasun Pharmaceuticals stockholders gave their near-unanimous approval to a merger with Strides Arcolab.