Cipla Ltd is acquiring a small sized domestic pharma company Meditab Specialties for Rs 133.35 crore, signaling further consolidation in the Indian pharma sector where global giants are aggressively looking to buy local firms.
Cipla that is now the second most valued Indian run drug company (behind Sun Pharma), has disclosed that entities controlled by the relatives of the promoters are major shareholders in Meditab. The aggregate consideration for the acquisition was determined on the basis of the valuation report provided by Grant Thornton and fairness opinion provided by Kotak Mahindra Capital Company Ltd.
Meditab has formulation manufacturing facilities at multiple locations that are already making substantial chunk of products for Cipla which means Hamied’s owned firm is going for backward integration to emerge a bigger entity.
Besides giving control over Meditab’s manufacturing units which would result in improvements in operational and cost efficiencies, Cipla will also benefit from expansion of the its API/intermediates international business through the manufacturing facility in China, entry into the high growth Chinese domestic formulations market through the local manufacturing facility in China and additional business opportunity in Africa by leveraging on local manufacturing facility in Uganda, Cipla said in a statement.
The deal will also extend Cipla’s existing strategic relationship for research & development of stem cell based products having facilities in India and Malaysia, through equity participation.
Despite announcing a special dividend for shareholders on the occasion of its 75th anniversary, Cipla shareholders do not seem too enthused by the deal. The stock is down over 4% over the last one week. This could be on account of the fact that the company is acquiring a firm in which already has the backing of the promoters Hamieds. Such transactions have been in the scanner of investors for a while given issues related to valuations.