A Study in Cross-Border Pharmaceutical M&A – VIPS LAW BLOG

– Saurav Kumar*

Overview

On April 26, 2026, India’s leading pharmaceutical company, “The Sun Pharmaceutical Ltd.” Signed a deal to buy Organon & Co, an American-based company. This deal has been finalised in an all-cash deal valued at about USD 11.75 billion. The board of both companies approved the deal, under which The Sun Pharmaceutical Ltd will pay USD 14.00 in cash per share to Organon. This deal is expected to be closed in early 2027, subject to the pending regulatory clearances and approval from the Organon stakeholders. This acquisition marks the largest overseas transaction by an Indian pharmaceutical company to date.

Strategic rationale

 Sun Pharma will be able to gain Organon’s global products portfolio, which includes more than 70 products in the women’s health, biosimilar and established medicines which are sold in over 140 countries worldwide. This deal will make Sun Pharma among the top 25 pharma players with up to USD 12.4 billion annual revenues. The company’s existing product and portfolio, and Organon’s women’s product portfolio and biosimilar businesses, will complement Sun Pharma’s existing product portfolios in particular. This will make the merged entity a top 3 leading player in women’s health and biosimilars products globally. Analysts expect this deal to double Sun Pharma’s revenues, adding about USD 6.2 billion in sales. Sun’s management has also highlighted synergies of at least USD 350-500 million, and this will also help the company to expand its footprint in the new markets like China, Brazil and many other emerging economies.

Regulatory and Legal Framework

As Organon is an American-incorporated company and is traded on the New York Stock Exchange, American law governs the key aspects of this deal. This merger will require clearance under the Hart-Scott-Rodino (HSR) Act, under which parties must file a pre-merger notification with the United States Federal Trade Commission and the Department of Justice, and observe a waiting period to satisfy the Clayton Act requirements. Organon, in its Securities Exchange Commission filings, explicitly notes that closing is subject to the expiry of Hart-Scott-Rodino waiting periods and the receipt of other non-United States foreign investment approvals. The deal will also be subject to review under United States securities laws, where Organon has filed an SEC Form 8-K disclosing the merger of the company with Sun Pharma, and Sun Pharma has to file a proxy filing and obtain the Organon shareholder approvals under SEC regulations. If the transaction involves any national security-sensitive technologies, in this case, the merger of both companies might face review by the Committee on Foreign Investment in the United States.

Indian Regulatory Context

This merger is an outbound acquisition from the Indian side. Indian laws specifically require compliance with the foreign exchange regulation under the FEMA Act and the RBI guidelines. In the past, the share swap between the two entities involving foreign targets by the Indian companies required prior approval of the Reserve Bank of India or the Government of India. However, in recent times, the changes in the NDI rules have allowed many outbound deals on the automatic routes. In addition, the cross-border merger in India also needs to comply with the provisions under the Companies Act. In the Indian context, the erstwhile Companies Act 1956 only allowed inbound mergers. Section 394 of the erstwhile Companies Act 1956 laid down provisions for the reconstruction and amalgamation of companies. Under this provision, only foreign transferor companies were allowed to merge with the Indian transferee companies to do business in India and not vice versa.

However, in 2017, section 234 of the Companies Act, 2013 was notified, which opened the path to cross-border merger, and this was later on followed by the introduction of the Foreign Exchange Management (Cross-Border Merger) Regulation Act, 2018.

United States Legal Framework

In the U.S., mergers and acquisitions are subject to federal antitrust law under the Sherman Act and the Clayton Act. Section 7 of the Clayton Act prohibits mergers that “may substantially lessen competition.” Since this transaction is large (well above the HSR filing threshold), it will require FTC/DOJ review. The companies have committed to cooperate on any required divestitures or remedies if authorities deem competition concerns. On the corporate side, Organon’s Delaware charter (and Delaware General Corporation Law) governs the merger mechanics for the U.S. entity, including appraisal rights for any dissenting shareholders. Sun Pharma’s acquisition is structured as a cash merger with Organon (a Delaware Corp); accordingly, Organon’s stockholders tender their shares for cash consideration. After closing, Organon’s NYSE listing will be removed and its SEC registration terminated within ten days. U.S. securities laws also impose fairness requirements: Organon’s Board must recommend the deal to shareholders, and Sun Pharma’s U.S. subsidiaries filed the 8-K and related proxy statements to comply with the Exchange Act. 

Historical Precedents: The Ranbaxy and Taro Case Studies

To understand the risks associated with the Organon deal, one must look at Sun Pharma’s history of “distressed asset” turnarounds. Executive Chairman Dilip Shanghvi has long followed a playbook of acquiring troubled companies with strong pipelines and fixing their operational or regulatory inefficiencies.

The Ranbaxy Acquisition (2014)

The $4 billion takeover of Ranbaxy Laboratories from Japan’s Daiichi Sankyo remains the most consequential and complex merger in Sun Pharma’s history. Ranbaxy was a “fallen star” of the Indian industry, crippled by USFDA bans on several plants due to data falsification and violations of Current Good Manufacturing Practices (CGMP). Sun Pharma’s management treated Ranbaxy as a high-risk turnaround, focusing on “regulatory cleanups” and product rationalisation. While the merger initially caused a decline in profitability and liquidity issues, it eventually solidified Sun Pharma as India’s largest drugmaker. The “Ranbaxy lesson” emphasised that Sun Pharma is willing to absorb short-term uncertainty for long-term asset value.

The Taro Acquisition (2007)

If Ranbaxy was about scale and risk, the acquisition of Israel-based Taro Pharmaceutical Industries was a study in patience. Sun Pharma spent years building an incremental stake, navigating legal battles and valuation disputes before achieving full control. This approach allowed Sun Pharma to secure a dominant position in the US dermatology market without overpaying, demonstrating that “patience can be a competitive advantage”. By comparison, the Organon deal is significantly larger and involves a “cleaner” asset, though Organon faced its own scandal in late 2025 when its CEO was ousted following a probe into “improper” sales practices. Sun Pharma is now applying its “efficiency-driven playbook” to Organon’s large cost base, aiming to replicate its previous successes on a much grander scale.

Taxation aspects 

In the context of the merger between Sun Pharma and Organon, which is an outbound merger which is defined under Regulation 2(viii) of the Foreign Exchange Management (Cross Border Merger) Regulations, 2018, in this a critical issue that arises is whether they are eligible for tax neutrality under the Income Tax Act. Under the current provisions, the tax neutrality is recognised only when the amalgamated company is an Indian company. Income Tax Act, 1961 (Income Tax Act, 2025 proposed successor of 1961 Act) provides exemptions from capital gains tax on transfer of capital assets in schemes of amalgamation of entities which are incorporated in India. 

In an outbound merger, the requirement is not satisfied as the resultant company is a foreign company. Consequently, the transfer of assets from the Indian amalgamating company to the foreign company may be categorised as a taxable transfer, thereby attracting capital gains in India. Furthermore, shareholders of the Indian amalgamating company who receive shares in the foreign entity in exchange for their existing shareholding may also incur capital gains tax liability, given that the relevant exemption provisions are similarly contingent upon the amalgamated company being an Indian company.

Although the Companies Act, 2013, read with the Foreign Exchange Management Act (FEMA) Regulations, permits outbound mergers subject to regulatory approval, particularly from the Reserve Bank of India, the tax regime has not been correspondingly aligned to extend explicit tax neutrality to such transactions. In the absence of specific statutory exemptions, outbound mergers may therefore entail substantial tax implications for both the amalgamating company and its shareholders.

Additionally, where the foreign amalgamated entity constitutes a “permanent establishment” in India within the meaning of the applicable provisions, any income attributable to such establishment may be subject to taxation in India at rates that are generally higher than those applicable to domestic companies.

Conclusion

The Sun Pharmaceutical Industries’ acquisition of Organon & Co is the largest outbound deal by any Indian-incorporated entity. It signals a shift from the opportunistic, distressed-asset acquisition model to a structured, high-valuation play for “innovation-led” growth. The strategic benefits, including dominance in women’s health, a top-tier biosimilar platform, and an expanded global footprint, are weighed against significant financial leverage and the increasingly complex regulatory environments in the US and India. 

Organon brings a strong global franchise, with operations across more than 140 countries, leadership in contraceptives and fertility, a portfolio of over 50 established brands, and a rapidly growing biosimilars business. In sum, the Sun Pharma & Organon deal will be studied as a case of strategic expansion executed within the bounds of both Indian and American law, reflecting the evolving landscape of cross-border pharmaceutical M&A.

*[The author is a third-year BA LL.B. student at Vivekananda Institute of Professional Studies.]