Adcock Ingram, a leading South African healthcare group, is set to acquire the entire issued ordinary share capital of Cipla Medpro South Africa (Cipla) for a consideration of R2,125 billion. Cipla Ltd, India has exclusive supply arrangement for its pharmaceutical products with Cipla of South Africa. This financial consideration equates to approximately R4.75 per Cipla share. Cipla will become a subsidiary of Adcock Ingram.
The consideration will be settled in cash, with an option for shareholders to re-invest up to 25 per cent of the offer consideration in the combined entity. This allows Cipla shareholders to realise an attractive premium in cash, yet provides the opportunity to remain invested in, and benefit from the combined group.
Cipla, formerly known as Enaleni Pharmaceuticals Ltd, is one of South Africa's larger and fastest growing generic pharmaceutical companies. Listed on the main board of the JSE in December 2005, Cipla markets and distributes a broad range of pharmaceutical products, including treatments for cardiovascular and respiratory diseases, diabetes, oncology, neuro-psychiatry and HIV/Aids.
Adcock's acquisition of Cipla will drive efficiencies to deliver cost synergies neither company could extract on a standalone basis through enabling critical mass and value chain consolidation. In addition, the transaction will deliver revenue synergies and greater access to products through:
Commenting on the transaction, Adcock Ingram CEO Dr Jonathan Louw said, "The global and local pharmaceutical markets are changing rapidly. Both Adcock and Cipla will need to adapt to shifting sector dynamics in order to remain competitive. This transaction represents a unique opportunity to create a more diversified, complementary and strengthened portfolio of prescription, over-the-counter and hospital products, with an enhanced and more balanced exposure to target markets."
Adcock would prefer to implement the transaction on an agreed basis through a Scheme of Arrangement in terms of the Companies Act, as Adcock will then acquire 100 per cent of Cipla, will not be obliged to maintain the separate listing of Cipla, and will have greater flexibility in relation to the optimal deployment and configuration of the operations and assets of the combined group.
Louw continued, "This transaction will improve the strategic positioning of both companies by enabling the combined group to compete more effectively with local companies and multinationals in the South African pharmaceutical market. This will result in increased access to affordable medicines for South Africans. In addition, it will enable us to leverage Adcock's footprint and customer base in the rest of Africa with a broader and more complementary product offering, for the benefit of all stakeholders."