Sun Pharma’s $11.75-bn Organon deal to be part cash, largely bank-funded

India’s largest pharma company, Sun Pharma , on Monday attempted to allay concerns that investors and the markets may have over its debt-funded $11.75 billion acquisition of US-based Organon. Sun Pharma said the company’s priority would be to reduce debt following what it calls a ‘transformative’ Organon deal.

Dilip Shanghvi, founder of Sun Pharma, said: “As a company, you would know we are debt-averse but not risk-averse. At a time when we feel that debt will help us scale the business and change its trajectory, we are comfortable with it.”

“The balance sheet and the financials of the combined entity will become stronger and enable us to repay the debt in a shorter timeframe,” Sun Pharma’s chief financial officer, Jayashree Satagopan, told the media. She added that this would be supported by internal cash surpluses from Sun Pharma and “committed” financing from bankers.

The acquisition will be financed with $2–2.5 billion of cash on hand, and the remaining $9.25–9.75 billion will be funded through committed financing from banks. Sun Pharma currently has over $3.1 billion in cash on hand. The acquisition is expected to close in the next 6–9 months, by early January 2027, subject to approval by Organon shareholders and other regulatory clearances.

“The revenue and EBITDA of the combined business are nearly doubling, and there is free cash flow that will also enable early debt repayment,” she added. “Both entities together generate $2.5 billion in cash annually. With future growth opportunities and cross synergies, we believe this cash will help us in making debt repayments.”

After the deal, the net debt-to-EBITDA ratio would be around 2.3x, which Satagopan said is within a “feasible range.”

Post-acquisition, the combined entity is likely to have revenue of approximately $12.4 billion, while EBITDA would be around $3.7 billion.

Following the deal, Sun Pharma would become the largest pharma company in four countries, rank third in women’s health (contraceptives and fertility), and seventh globally in biosimilars.

Macquarie Capital’s pharma and healthcare research analyst, Kunal Dhamesha, told television channels that Organon is a strategic fit for Sun Pharma, especially after the target’s valuation correction. The combined operating cash flows of both companies should be sufficient to comfortably service the debt, he said.

Dhamesha estimates that Sun Pharma will return to a net debt-free position within the next three to four years.