India's largest generic drugs maker, Ranbaxy Laboratories Ltd, has offered to buy the Darmstadt-based Merck KGaA's generic-medicines division, valued by Credit Suisse at $6 billion. Stada, Teva.

The German company is hiving of its generic unit to concentrate on branded formulations. Merck Generics makes copies of asthma treatments such as GlaxoSmithKline Plc's Ventorlin and is the world's fourth-largest producer of generics. It is also the largest generic-drugs maker for sale since the acquisition of Ivax Corp by Teva for $7.6 billion last year.

Ranbaxy submitted its bid yesterday for the Darmstadt-based Merck KGaA's business unit. A successful bid would enable Ranbaxy gain access to Europe, the world's second-largest pharmaceuticals market.

Ranbaxy has been on an acquisition spree in Europe, but last year it was outsmarted by Dr. Reddy's Laboratories Ltd. for the acquisition of Betapharm Arzneimittel GmbH.

A deal with Merck could immediately make Ranbaxy the world's third-largest generics company by sales, behind only Teva Pharmaceutical Industries Ltd. of Israel and Sandoz, the generics business of Switzerland's Novartis AG.

Ranbaxy believes that acquisitions in the US and Europe would enable it to cut distribution costs to boost sales of its generic portfolio and enter the global big league.

Ranbaxy is India's largest drug maker in terms of revenue and is bent on growing as the global industry consolidates. Singh said Ranbaxy's goal is to enter the ranks of the world's top five producers of generic drugs. It's now among the top ten globally.

Analysts say Merck Generics is the best available acquisition target to attain the company's global ambitions, though they are not certain how Ranbaxy plans to fund the acquisition.

Other likely contenders
Analysts believe that the acquisition opportunity could also attract Novartis AG, Stada Arzneimittel AG, Germany's third-largest generic-drug maker, and Teva Pharmaceutical Industries Ltd, the world's biggest maker of generic drugs, and private equity companies may also bid, the people said.

Another possible contender for the acquisition, Dr Reddy's Laboratories, India's third-largest drug firm, has ruled itself out of the acquisition.

Also in the race is another Indian drug major Cipla Ltd, which has joined a consortium that's also submitted a bid for the Merck unit. Cipla, a generics maker based in Mumbai, will provide scientific and technical expertise for the consortium, which consists mostly of private equity firms, said Amar Lulla, managing director, Cipla. He declined to provide details about the bid, other than to say Cipla was the only drugmaker in involved in the consortium.

Ever since Malvinder Singh, CEO, expressed his interest in the German company's business, analysts have been speculating on the possible mode of funding for the acquisition.

Ranbaxy is already on record having said the promoters would not sell either a part of their stake or the company's shares in the US to fund the purchase of the generic-drug unit of Germany's Merck KGaA. Singh has also said his company was not in a ":rat race" to acquire the generics unit, but was only doing so to add to shareholder value.

Ranbaxy has appointed Goldman Sachs and Citigroup as its managers for the deal, sources said.

With the expiry of patents on drugs, generic-drug businesses have been attracted rising interest. Governments have also been encouraging low-cost drugs to prevent the rising cost of public health care.