Cipla Medpro shareholders approve buyout by India’s Cipla

cipla_logo_lowresSHAREHOLDERS of South African pharmaceutical company Cipla Medpro on Wednesday approved the acquisition of its entire issued capital by Indian pharmaceutical group Cipla, in a deal valued at R4.5bn.

The deal, one of the single biggest foreign direct investments into South Africa to date, aims to strengthen Cipla Medpro’s position in the South African market, expand its manufacturing facility in Durban and support its expansion into Africa.

The company said 99.7% of shareholders had voted in favour of the proposed buyout.

A resolution to delist the country’s third-biggest pharmaceutical firm from the JSE in September was also approved.

“Now that shareholders have approved the transaction, the Competition Commission in South Africa and equivalent bodies in Botswana, Namibia and the Common Market for Eastern and Southern Africa will need to approve the deal before it is finalised,” said acting Cipla Medpro CEO Johan du Preez, adding that applications had already been submitted in these jurisdictions.

Cipla Medpro chairman Sbu Luthuli said patients across South Africa and the rest of the continent “will now benefit from increased access to a wider range of affordable medicines, as the deal will contribute to the accelerated introduction of new products into South Africa”.

Cipla had offered to buy 100% of Cipla Medpro at R10 a share. Among the issues complicating the decision for shareholders had been Cipla Medpro’s 20-year supply agreement with Cipla, which expires in November 2025. The deal lay at the heart of Cipla Medpro’s business, as it secured a pipeline of generic medicines from Mumbai-based Cipla.

Despite repeated shareholder requests for sight of this contract over the years, it had remained confidential, fuelling anxiety about just how watertight the deal was.

Reports last month said Cipla Medpro’s directors and key staff were in for a rich payday if shareholders approved the offer. A circular to shareholders said R53.3m would be paid to participants in the company’s employee share ownership scheme to accelerate their share options.

Four Cipla Medpro directors —  Bongani Caga, Mr Luthuli, Mark Daly and Nthabiseng Mokone — would get a combined R31.7m for shares held directly and indirectly. Mr Luthuli would account for the bulk of this at R27.9m.

Mr Luthuli holds indirect shares through empowerment partner Sweet Sensation, where he bought the shares for R3, so he would make a profit of about R14m from the sale. He was not part of the board of independent directors that looked into the merits of the deal and said it was “fair and reasonable”.

Cipla Medpro posted a 32% fall in diluted headline earnings per share for the year to end-December. In what the group described as another challenging year, it said it had to contend with significant exchange-rate fluctuations and a rise of just 2.1% in the single exit price for medicines.

Cipla India CEO Subhanu Saxena said South Africa was an attractive marketplace for the pharmaceutical industry.

“South Africa is an attractive emerging market with strong projected growth for generics of about 14% per year for the next several years,” he said. “This investment is aligned with Cipla India’s strategy to ascend the value chain by managing its own front-end sales forces in priority markets outside India.”

The shares of Cipla witnessed above average volumes and closed at Rs 411.10, up nearly 3% on the NSE with a volume of 16.03 lac shares.

Source : Business Day Live.

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