'Cipla's offer to buy out likely to get shareholder approval'
Johannesburg: An offer by Indian pharma giant Cipla to buy 100 percent of Cipla Medpro in South Africa is expected to be approved by shareholders at a meeting scheduled for April 30, says a top company official.
According to Cipla Medpro acting chief executive Johan du Preez, the largest shareholders in the company has already indicated their support for the offer from Cipla in India, so the required 75 percent positive vote at the meeting is not expected to be a problem.
Cipla India has offered South African Rand (R) 10 a share for the acquisition, which will result in the deal being worth about R4.5 billion.
Initially, Cipla India sought a 51 percent holding, but the deal was improved for several reasons, Du Preez said.
The main reason for this was the complexity of operating a South African company with a 49 percent stake where the parent company in India controlled the operation.
Another reason cited was the lucrative multi-million rand government tender award for supply of anti-retroviral drugs that was won by Cipla Medpro in December last year, he added.
Analyst Wilhelm Hertzog of Regarding Capital Management felt that the offer which was in favour of shareholders was boosted by the 20-year supply pipeline agreement between the two companies.
"Cipla in South Africa has always been dependent on the support of Cipla India in terms of that arrangement, and if things did not work out it could have had a huge influence on its profitability," Hertzog said, adding that Cipla Medpro was achieving higher profit margins than Cipla India.
The takeover by Cipla India will be the first of a South African pharmaceutical company by an overseas group.
Cipla Medpro will be delisted once the transaction has been finalised.
Cipla Medpro Chairman Sbu Luthuli told the daily 'Business Day' the deal would create a more efficient pharmaceutical player and generate benefits for stakeholders in South Africa.
Luthuli said Cipla India was committed to back economic empowerment and would continue to support this at the South African company.