Mumbai, Nov. 21: Pharmaceutical giant Cipla is in discussions to acquire Cipla Medpro South Africa Ltd (Cipla Medpro), its South African distributor.
At present, the Mumbai-based company does not have any stake in the South African entity even though both share the same name. This will be Cipla’s first overseas acquisition in a long time.
In a communication to the bourses today, Cipla said it was eyeing around 51 per cent stake in Cipla Medpro. If successful, it will have to pay $220 million (Rs 1,200 crore).
Cipla added that it had submitted an indicative proposal to the South African company for a majority stake. Cipla has offered Cipla Medpro South African rand (ZAR) 8.55 per share, which does not include the dividend of ZAR 0.10 per share that the latter is expected to give to its shareholders at the end of the fiscal year ending March 2013.
Cipla Medpro is the third largest pharmaceutical company in South Africa and it also distributes Cipla products in neighbouring countries. The target company earned revenues of over $120 million in the first half of this fiscal and is a profitable entity.
Cipla said the discussions were subject to various conditions, including finalisation of due diligence, execution of definitive documentation, applicable board, regulatory and other approvals. It added that at this stage, there was no certainty the discussions would lead to a firm offer being made or a transaction being consummated. The company will fund the acquisition entirely out of internal accruals.
Analysts said the proposed acquisition was part of the firm’s plan to grow its share in the South African generic drugs market. The pharmaceutical market is expected to grow at around 10 per cent over the next five years. Generic drugs account for a large share of the market there.
Exports now contribute to around 56 per cent of Cipla revenues. During the second quarter of this year, exports of formulations rose around 38 per cent to Rs 1,039 crore up from Rs 752 crore in the same period last year. Exports of active pharmaceutical ingredients (APIs) rose 9 per cent to Rs 174 crore.
The jump in export revenues was led by growth in anti-depressants, anti-ulcerant and anti-asthma segments.
On the BSE, the Cipla stock rose almost 3 per cent to close at Rs 389.70 as the marketmen believed that the deal wasn’t very expensive.