Strides To Get $30 Million From Escrow Account After Settling Agila Deal Claims With Mylan
Strides Shasun shares rally on settlement with Mylan
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Strides Shasun Ltd. announced a settlement with Mylan Laboratories Ltd., over the 2013 sale of injectables producer Agila Specialities Private Ltd. Strides will receive approximately $30 million from a regulatory escrow account.
“Strides and Mylan have now agreed on a full and final settlement of all regulatory claims notified by Mylan,” Strides said in an exchange filing.
Pursuant to this full and final settlement, Mylan’s regulatory concerns claims will be satisfied from the regulatory escrow, and Strides will receive approximately $30 million, representing the balance of funds it deposited in the regulatory escrow on consummation of the Agila sale.Strides Shasun’s Exchange Filing
Two Escrows And A Warning Letter
Strides Shasun and its wholly-owned subsidiary, Strides Pharma Asia Pte Ltd. completed the sale of Agila Specialties Private Ltd. to Mylan Laboratories and Mylan Institutional Inc. in December 2013.
Two escrow accounts, of $100 million each, were created at the time of completion of the $1.75 billion deal. The first one, a regulatory escrow, was set up for potential regulatory concerns related claims, and the second one, a general claims escrow, was created for warranties and indemnities, including taxes.
The general claims escrow will be valid until December 2017, and can be used for any potential tax or third party claims, Strides added.
Mylan sought compensation from Strides in December 2015, after the facilities acquired as part of the Agila deal, received a warning letter from the U.S. Food and Drug Administration.
‘Incrementally Positive’
The settlement ends the fear that Strides could have been asked to pay more than $100 million set aside in the escrow account, Prakash Agarwal, an analyst at Axis Capital told BloombergQuint in a telephonic interview.
There was concern Strides would have to pay higher than $100 million. Now with this settlement and with Strides getting $30 million back, its incrementally positive as it reduces overhang on Strides since Mylan had received a warning letter and could have asked for a higher sum.Prakash Agarwal, Analyst, Axis Capital
The settlement also augurs well for Strides as the $30 million from the escrow account can be used to reduce the debt on its books, Agarwal added.
Shares of Strides Shasun jumped as much as 4.6 percent to Rs 1,096, its highest level in 2.5 months, on the back of the announcement.