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Dr. Reddy's Laboratories: A favourable swap

BY setting the swap ratio _ one share of Dr. Reddy's for every 12 shares of American Remedies _ Dr. Reddy's merger with American Remedies is taking place on terms that are favourable to the former. At the current market price, the swap ratio values Ameri can Remedies at a discount of 21 per cent when compared to the value based on its stock price. Through this merger Dr.Reddy's has strengthened its position in the pharmaceutical market. The move not only helps Dr. Reddy's gain control over a well establi shed vitamin portfolio but also adds a reputed sales force. The merger should have a positive effect on Dr. Reddy's revenue and earnings potential over the long-term. The stock may also see a firm trend in the near future on the back of upbeat sentiments . The American Remedies' stock may show some price weakness given the swap ratio and the current valuation of Dr. Reddy's stock.