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April 30, 2008, 7:34 a.m. EDT

Dr Reddy's to buy BASF contract manufacturing operations

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By Rumman Ahmed

(Adds comments from chief executive, share price)

BANGALORE (MarketWatch) -- Indian drug maker Dr Reddy's Laboratories Ltd. is buying German chemical company BASF's (BAS.XE) pharmaceutical contract manufacturing business and related facility in the U.S. for $40 million, Dr Reddy's Vice-Chairman and Chief Executive G. V. Prasad said Wednesday.

"Including working capital, the size of the deal is $40 million," Prasad told Dow Jones Newswires by phone from London.

This is Dr Reddy's third acquisition this month. It agreed to buy U.S.-based Dow Chemical Co.'s (DOW) small molecule operations, and then acquired Italy's Jet Generici Srl, a company selling generic drugs.

"The acquisition is aimed at strengthening our North America generics business. It will add to our portfolio of generic prescription and over-the-counter products and give us the ability to supply generic products to U.S. government agencies," Prasad added.

The transaction is expected to be completed within the first quarter of the current financial year (started April), the company said in a statement.

The deal will be funded through Dr. Reddy's internal cash reserves or other committed credit facilities.

BASF's unit, which makes over-the-counter and generic prescription products under contract for companies in the U.S., generated $43 million in revenue in 2007.

He said the company is open to more acquisitions.

"The acquisitions are a part of our strategy to build our global generics and CPS (custom pharmaceutical services) businesses," Prasad said.

At 0710 GMT, Dr Reddy's shares were trading 0.2% up at INR628 on the Bombay Stock Exchange, while the 30-share Sensex was down 0.4% at 17,303.75.

-Contact: 201-938-5400

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