Matrix says overall, the acquisition will have incremental positive impact on its earnings potential, besides providing several other indirect advantages.

According to the term sheet executed, Matrix would acquire 55-per cent stake in Concord Biotech through a combination of purchase of existing equity shares from the promoters and other shareholders and subscribing to the new equity shares to be issued by Concord Biotech on a preferential basis.

Sudhir Vaid, the main promoter and the managing director of Concord Biotech, and his associates will continue to hold 29 per cent stake in the company. Other existing shareholders will hold a 16-per cent stake.

Vaid and his team will continue to spearhead the operations of the Concord reporting to the board in which Matrix will have majority representation.

Explaining the strategic rationale for acquiring controlling stake in Concord Biotech, N Prasad, executive chairman , Matrix Laboratories, said, "Our investment in Concord Biotech is in line with our strategic intent to acquire fermentation technology and manufacturing capabilities. This is a key step in the evolution of Matrix and this has come in at a time, when the major fermentation based products are going off-patent in the international markets. This investment will add statins, enzymes and immuno-suppressants to our product portfolio and hence widen the range of products offered to Matrix's customers".

Matrix laboratories has been in the news this year for developing a string of overseas linkages. In June 2005 it acquired a controlling interest of 22 per cent in Docpharma NV through its 100-per cent Belgian subsidiary Matrix Laboratories NV. In September it acquired a 43-per cent stake in the Switzerland-based Explora Laboratories SA, a research and development-focused company specialising in APIs and intermediates, thereby establishing its presence in oncology and hypotensive APIs.

In the same month it executed a JV agreement with Aspen for a long-term business relationship and also entered into an agreement for acquiring 60-per cent controlling stake in Mchem Group, China.

The acquisition of a controlling stake in Concord Biotech will add to the technology and manufacturing strengths of Matrix, which will be able to utilise the market potential of the fermentation technology-based products of Concord. Matrix will leverage its own customer base and marketing strengths in the global generic markets.

The acquisition will provide synergies in terms of providing API support to some of the existing and pipeline products of Docpharma, Belgium particularly for lipid lowering and immuno-suppressant products.

The acquisition will also help Matrix in executing its overall business strategy proactively de-risking its business in terms of product segments.

The acquisition of new technology and manufacturing capabilities through Concord Biotech will expand the scope of the contract research and manufacturing services (CRAM) business segment of Matrix . Concord also undertakes custom synthesis projects in biotechnology.

Matrix and Concord will enter into a management contract for key personnel from Concord for a period of five years. In addition, Vaid will also enter into a non compete agreement with Matrix for three years, which would commence after the completion of the period of the management contract.

In the first half year of 2005-06, Matrix Laboratories' topline was Rs3.28 billion registering a growth of 3.9 per cent year-on-year and export growth of 12.1 per cent YoY to Rs1.55 billion. In. the second quarter of the year, it registered a 7.3-per cent YoY topline growth at Rs1.74 billion with a 67.7-per cent YoY export growth to Rs842.8 million.