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| Cipla may end ties with South Aftican firm |
| P B Jayakumar / Mumbai Apr 19, 2009, 00:30 IST |
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Rival Adcock has offered to buy Cipla Medpro, with which Cipla has a supply agreement.
Indian drug maker Cipla Ltd plans to terminate its 20-year drug-supply agreement with Cipla Medpro if the South African company Adcock Ingram succeeds in acquiring the latter.
"We see Adcock Ingram as a competitor for us in South Africa and are not comfortable in dealing with a competitor in that market," said Amar Lulla, joint managing director of Cipla.
Cipla doesn't own any stake in Cipla Medpro, but is a key supplier. Cipla Medpro sells many key prescription antibiotics and HIV/AIDS drugs in the South African market.
Cipla is estimated to earn about 15 per cent of its export revenues from the deal with Cipla Medpro. However, Amar Lulla declined to reveal the revenues from its deal with Cipla Medpro. Of the Rs 4,429 crore turnover, Cipla exports about 34 per cent of its production, mainly HIV/AIDS drugs, to the African continent.
He said Cipla was not opposing the takeover proposal of Adcock since it was not a party to that transaction.
“But we have our own views related to business relationships with a competitor. We are also reviewing the legal aspects of our deal with Cipla Medpro," he said.
Analysts observed that Cipla's stand might be a ploy of the Indian drug maker to bargain for entering into fresh supply agreements with Adcock or a ploy to scuttle Adcock's offer as the staff and a major shareholder of Cipla Medpro were opposing the takeover proposal.
A combined Adcock-Cipla Medpro would have a generic drug market share of over 25 per cent in South Africa, Adcock Chief Executive Officer Jonathan Louw had earlier told Business Standard in a telephonic conversation from South Africa.
Johannesburg-based Adcock, the second largest generic drug maker in South Africa, last week had announced its plan to acquire Cipla Medpro for close to $233 million or 2.13 billion rand.
Meanwhile, Adcock's attempts to acquire the company are turning out to be a hostile acquisition as Cipla Medpro Chief Executive Jerome Smith has opposed Adcock’s current offer.
Sweet Sensations, Cipla’s largest shareholder with 18.5 per cent, is also opposing the takeover proposal. Adcock Ingram management claims it has the support of almost 35 per cent of Cipla Medpro’s shareholders such as Stanlib, Allan Gray, Sanlam Investment Management, Visio Capital and RMB.
Cipla Medpro is strong in the prescription market, while Adcock leads in the over-the-counter (OTC) and hospital products markets.
The merger would be a win-win for both Cipla and Adcock as both would leverage their strengths, Jonathan Louw had said earlier. Earlier, Amar Lulla had indicated that the company would like to continue the supply deal, which is valid till 2025, despite the takeover proposal. Cipla is not exclusively supplying to Cipla Medpro and has parallel drug sales channels in South Africa.
Adcock Ingram is South Africa's second largest generic company after Aspen Pharmacare.
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