Cipla inks pact to divest animal health business in South Africa

Cipla will sell its South African animal health business to Ascendis Health for 375 million rand (about Rs190 crore)


Cipla has entered into agreements with Ascendis Health for divesting its entire stake in Cipla Agrimed Proprietary Ltd and Cipla Vet Proprietary Ltd. Photo: S. Kumar/Mint
Cipla has entered into agreements with Ascendis Health for divesting its entire stake in Cipla Agrimed Proprietary Ltd and Cipla Vet Proprietary Ltd. Photo: S. Kumar/Mint

Mumbai: Cipla Ltd, India’s second largest drug maker by revenue, on Sunday said it has agreed to sell its animal health business in South Africa to Ascendis Health Ltd for 375 million rand (about Rs192 crore).

Cipla, through its wholly owned unit Inyanga Trading 386 Proprietary Ltd, has entered into agreements with Ascendis Health for divesting its entire stake in its units Cipla Agrimed Proprietary Ltd and Cipla Vet Proprietary Ltd.

The total consideration of transaction will be 375 million South African rand, with a potential revision linked to FY17 performance along with customary adjustment (within the price band of 250-500 million rand) in relation with working capital and net debt/cash adjustments, Cipla said in a press release.

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“Cipla has taken the strategic decision to divest and sell its veterinary division. In line with this new strategy, Cipla will have a more intensive approach to grow our portfolio of quality and affordable products with an aim to provide an even broader range of pharmaceutical solutions in more therapeutic areas in the South African healthcare sector,” said Paul Miller, chief executive officer, Cipla South Africa.

Cipla Agrimed operates in the farm animals segment, with sales mainly attributable to farm co-operatives and bulk farm purchasing organizations, while Cipla Vet in South Africa operates in the companion animal segment, with sales primarily to wholesalers.

“Cipla will now be able to focus on its core pharmaceutical business, while unlocking the valuation of animal health business,” said Ranjit Kapadia, senior vice-president, Centrum Broking.

In the quarter to December, the company’s South African business clocked a revenue of Rs495 crore, accounting for 14% of the total sales of Rs3,647 crore.

The company has been working to rationalize its markets and portfolio, and exit non-core, low-profit businesses. As part of this strategy, it plans to sell its consolidated animal health business, under Cipla Vet, which supplies products to over 100 countries.

In a recent interview with CNBC-TV18, Umang Vohra, managing director and global chief executive officer of Cipla, had said that after reviewing the animal health business, the company believes that there are better owners for this business who can guide it more strategically and Cipla is now concentrating on specific areas for growth.

Cipla does not provide specific financial details for its veterinary business and has classified this segment under the ‘others’ category in its earnings presentation.

The category accounted for 2-3% of the company’s total consolidated sales of Rs13,678 crore in 2015-16.

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