Cipla offers to buy 51% in SA distributor

Pharmaceutical company Cipla has said it is in preliminary discussion to buy its South African distributor, Cipla Medpro.

It made, it says, an indicative proposal to the South African company for a 51 per cent stake, valued at Rs 1,210 crore at the current exchange rates. Cipla has offered to pay Rand (the South African currency) 8.55 a share to Cipla Medpro. This valuation does not include the maximum dividend of Rand 0.10 a share that Cipla Medpro is expected to give shareholders at the end of the current financial year.

Cipla said the discussions are subject to various conditions, including finalisation of due diligence, execution of definitive documentation, applicable board, regulatory and other approvals. Adding: “There is no certainty that these discussions will lead to a firm offer being made or a transaction being consummated.”

Cipla’s shares climbed 2.6 per cent to Rs 389.70 each on the Bombay Stock Exchange on Wednesday, after this announcement.

Cipla Medpro is a distributor of Cipla Ltd’s products in South Africa and neighbouring countries. The company is said to be South Africa’s fastest growing pharmaceutical company and is currently the third largest.

At the end of the September quarter, 56 per cent of Cipla’s revenue came from its business outside India.

Net profit grew to Rs 500 crore in the quarter as against Rs 309 crore in the corresponding quarter of last year.

Export of formulations in the quarter grew 38.2 per cent to Rs 1,039 crore and exports of active pharmaceutical ingredients went up nine per cent, to Rs 174 crore.