Monday, April 20, 2009

Adcock's plan to buy Medpro hits Cipla hurdle

NEW DELHI: South African company Adcock Ingram’s plans to buy Cipla Medpro, with whom Indian pharma major Cipla has a 20-year drug-supply agreement, has run into trouble with the Mumbai-based company opposing the $228-million takeover.

Cipla’s joint MD Amar Lulla told ET: “The drug-supply agreement allows us to terminate the supply programme if there is a change in the management. We oppose the takeover by Adcock. We will exercise all options, including legal process.” He added that Cipla can also change the registration of the drugs currently being supplied to Cipla Medpro and instead sell the same drugs independently.

When contacted, Adcock CEO Jonathan Louw said: “Adcock has not had any formal response from Cipla India since making its formal offer to Cipla Medpro. We remain convinced that the strategic rationale for the deal is compelling and is in the interest of all shareholders, Cipla Medpro, and Cipla India.

It is Adcock’s preference to have the support of Cipla India, particularly with respect to continuing supply of pharmaceutical product from Cipla India, and we will look forward to engaging the Cipla India board in this regard over the coming weeks.”

He added that while the transaction is currently conditional on Cipla India confirming the continuation of the supply agreement, as it has been disclosed to the public, this condition may be waived off by Adcock. Mr Louw said that Adcock has received support from almost 35% of Cipla Medpro’s shareholders, namely Stanlib, Allan Gray, Sanlam Investment Management, Visio Capital and RMB.

Mr Louw said the company has not done due diligence of Cipla Medpro, and therefore, cannot comment on the financial impact if Cipla chooses to terminate the supply agreement.

Last week, South Africa’s second-largest drugmaker Adcock Ingram announced that it plans to buy Cipla Medpro at 4.75 rand per share, a 36% premium over the previous day’s closing price. Cipla has no equity in Cipla Medpro, which is one of South Africa’s top 10 pharma firms and has a $100-million turnover, but has a 20-year agreement to supply key mainly HIV drugs which expires in 2025.

The acquisition would have allowed Johannesburg-based Adcock to control a quarter of the South African market. Adcock Ingram has a partnership with Bangalore-based Medreich for the past seven years. It formed a manufacturing JV in Bangalore 18 months ago, to manufacture OTC products for the South African and African region.

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