Mumbai: Cipla Ltd is in preliminary discussions to acquire Cipla Medpro South Africa Ltd, its distributor in South Africa, the Indian company said on Wednesday. Cipla’s shares rose 2.61% to Rs.389.70 each on BSE after the announcement.
India’s third largest drug maker said in a regulatory filing that it has made an indicative proposal to the South African company for a 51% stake valued at Rs.1,210 crore based on the current exchange rates. Cipla has offered to pay Cipla Medpro South African rand (ZAR) 8.55 (around Rs.53) a share, which does not include the dividend of ZAR 0.10 per share that Cipla Medpro is expected to give to its shareholders at the end of the fiscal year ending March.
Cipla Medpro, South Africa’s third largest producer of medicines after Aspen Pharmaceuticals Ltd and Sanofi, also distributes Cipla products in neighbouring countries. Cipla’s export of formulations had increased 38.2% to Rs.1,039 crore in the September quarter and Cipla Medpro was one of the importers, which contributed significantly to this growth.
The South African company earned revenue of $121 million (around Rs.670 crore today) in the first six months ended 30 September. It posted a net profit of $32 million on sales of $199 million in fiscal 2011.
“This development is a positive for Cipla as it now gets a good access to the branded and OTC (over-the-counter) space apart from the tender-related business in Africa,” said sector analyst Hitesh Mahida of Fortune Equity Brokers (India) Ltd. “The deal value is also lower than the deals seen in the pharma space in the last couple of years, which have been in the range of three-five times of sales, though the deal is subject to various approvals from shareholders and regulatory bodies.”
Cipla Medpro operates mainly in the branded formulation business through the tender-based healthcare market in South Africa. It also sells farm and animal healthcare products.