Shareholders resist Cipla Medpro South Africa buyout

April 16th, 2009 - 9:57 am ICT by IANS  

By Fakir Hassen
Johannesburg, April 16 (IANS) Although Cipla India has come out in strong support of the bid by South African pharmaceutical company Adcock Ingram to take over Cipla Medpro South Africa, a number of shareholders are resisting the deal, citing that the offer price is too low.

Cipla India does not have any equity stake in Cipla Medpro SA, but shareholders said an agreement between the two should make the price being offered much higher.

Cipla Medpro SA is party to a long-term supply agreement to manufacture pharmaceutical products developed by Cipla India for the South African market until 2025.

Cipla India joint managing director Amara Lulla was reported to have told Indian media: “If Adcock Ingram is ready to continue the existing arrangement, we will continue the supplies.”

Adcock Ingram said last week that it had made an offer of 4.75 rands ($0.5) per share in its attempt to acquire a full stake in Cipla Medpro, but would settle for a 50.1 percent stake if did not get the requisite support for the offer.

Reports here indicated that more than 25 percent of Cipla Medpro shareholders would not accept the Adcock offer, among them Sweet Sensations, the black economic empowerment partner of Cipla Medpro which holds 18.5 percent and Kagiso Asset Management with the seven percent it holds on behalf of investors.

Kagiso head of research Abdul Davids said the offer was too low because the price did not take into account the positive future prospects of the relationship that Cipla Medpro SA has with Cipla India.

“Thanks to Cipla’s agreement with Cipla India, it has become a much stronger player in the local market for generic medicines,” Davids told the Afrikaans daily Beeld here.

“(Cipla) also has substantial growth prospects. Adcock therefore needs Cipla far more than Cipla needs Adcock,” he added.

Echoing similar sentiments, Sweet Sensations said it wanted a higher share price as the one being offered would not cover the loans taken out by Sweet Sensations to fund its holding in Cipla.

Cipla SA Board Chairman S’bu Luthuli said the company hoped to issue a statement on the matter by the end of the week.

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