Thursday, June 4, 2009
Adcock Angram decides not to acquire Cipla Medpro SA
Adcock Ingram has abandoned its earlier decision to acquire Cipla Medpro SA (CMSA) on account of a key suspensive condition to proposed transaction and opposition from Cipla India. During April 2009, Adcock had shown interest to make an offer to acquire the entire issued share capital of CMSA. However, the company found that there is no reasonable prospect of a key suspensive condition pertaining to the contractual relationship between Cipla India and CMSA. Commenting on the withdrawal, CEO Jonathan Louw said, "While we are disappointed to withdraw from a transaction which had such a compelling commercial rationale, we have been placed in an untenable position. Given the lack of response from the CMSA Board, the uncertainty over the precise nature of the contractual relationship between Cipla India and CMSA, and the potential risk of retributive action by Cipla India in respect of its commercial relationship with CMSA, the prospect of successfully completing a commercially viable transaction is no longer possible. We remain committed to our strategy of growing Adcock Ingram through prudent acquisition, and delivering value to shareholders." Adcock Ingram is a leading South African healthcare group. Adcock's Pharmaceutical division holds the No 1 position in OTC medicines and the No 2 position in prescription generics. Adcock has leading market shares in key segments, with two prescription brands (namely Synap Forte and Adco-Zolpidem) ranked No 1 in their respective treatment segments. In addition, Adcock has three of the top ten OTC brands: Adco-Dol, Panado and Corenza C. Adcock's Hospital Products division is South Africa's leading supplier of hospital and critical care products; these include blood systems, accessories and products used for renal dialysis.The company's press release said that the Adcock Board has repeatedly requested the CMSA Board to provide its view on the merits of the proposed transaction. Despite its public undertakings to do so, the CMSA Board has yet to respond to the merits of the Firm Intent Notice. Instead, the CMSA Board focused attention on the stated opposition of CMSA's principal supplier, Cipla India to the proposed transaction with a view to discouraging Adcock in proceeding with the proposed offer. While Adcock recognises the value of CMSA's relationship with Cipla India, Adcock has consistently maintained that it would seek the formal support of Cipla India at the appropriate time - which would be after the CMSA Board had published its views on the merits of the proposed transaction to CMSA shareholders. Adcock believes that if the CMSA Board is of the opinion that the proposed transaction represents a fair opportunity for CMSA shareholders, it would be the CMSA Board's responsibility to persuade Cipla India to reconsider its view.