South African firm wants ties with Cipla India to continue

May 5th, 2009 - 8:27 pm ICT by IANS  

By Fakir Hassen
Johannesburg, May 5 (IANS) South African generic drug manufacturer Cipla Medpro Monday said its relationship with Mumbai-based pharmaceutical major Cipla India was in shareholders’ interest, which would be hurt if it was taken over by rival Adcock Ingram.

Maintaining that its relationship with the Indian drug manufacturer “is crucial”, Cipla Medpro said any development that could lead to the termination of this relationship would not be in the best interests of the company or its shareholders.

Cipla India does not have any stake in Cipla Medpro, which merely holds the right to manufacture pharmaceutical products developed by the Indian firm for the South African market until 2025.

Adcock Ingram announced its intention early in April to buy the entire issued share capital of Cipla Medpro, at a 32 percent premium on its closing price April 8.

In its potential offer to acquire Cipla Medpro, Adcock Ingram said it wanted written confirmation from Cipla India that the supply agreement it has with the South African partner would continue, on no less favourable terms, until September 2025.

It also stipulated that the implementation of the potential offer would not trigger any rights in the hands of Cipla India.

But Cipla Medpro has released details of a letter from Cipla India chief executive Amar Lulla to Adcock chief executive Jonathan Louw, which stated that the Indian company rejected these conditions.

“This letter serves to advise you that we, Cipla India board, will not support your bid to purchase Cipla Medpro SA Ltd now or at any time in the future,” the letter read.

“Firstly, Adcock Ingram is associated with companies in competition with ourselves. Secondly, in my view, there is no compelling case to merge the two companies. I have known the people at CMSA (Cipla Medpro SA) for as long as 14 years. They have been loyal partners and friends and we see no reason whatsoever to change what has worked for both of us.”

The letter added: “I once again remind you that Cipla India will take whatever steps necessary to protect our reputation and rights according to the intent of the manufacturing agreement (with Cipla Medpro).”

Cipla Medpro has also said the Adcock proposal was not in the interest of Black Economic Empowerment (BEE) - a programme to redress the inequalities of Apartheid by giving previously disadvantaged groups the economic opportunities previously not available to them.

It said this was was one of the reasons why its own BEE partner, Sweet Sensation, had rejected the Adcock offer.

“Sweet Sensation firmly believes that the potential offer is unlikely to deliver the performance and returns to shareholders that could be achieved through an independent Cipla Medpro in partnership with Cipla India, with current management in place,” the statement said.

Cipla Medpro shares fell 9.6 percent after the announcement, the highest since December 2005.

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