Race to Cipla’s promoter stakes gets more competitive; Dr Reddy’s Labs speculated to bid
Blackstone and Torrent have confirmed their interest however Dr Reddy's Laboratories have declined to comment on any speculations. Winning these stakes could mean massive expansion for bidders in the Indian consumer health market
Indian Pharma Giants are making waves in the economic news scene leaving everyone speculating for the next move. This wave began when the Economic Times, earlier on September 5th reported that Bain Capital had reached out to Dr Reddy’s Laboratories to explore a joint offer to buy out the promoters of Cipla, the Hamied Family.
It was reported that senior leaders of both companies met last week alongside their financial aides and advisors in order to formalise a strategy.
However, Dr Reddy’s Labs issued a formal statement later on the 5th to clarify their dissuasion from commenting on market speculations. “Currently, there is no such event or information, which requires a disclosure under the SEBI listing regulations,” the statement from Dr Reddy’s said.
Cipla is the fourth largest drug manufacturer that is being battled for reigns by Blackstone and Torrent Pharma.
According to a media source on September 4, Torrent Pharmaceuticals is the current frontrunner in the contest, having made a non-binding offer that is more than 30% greater than Blackstone’s proposal.
The reports also cite
Torrent Pharma has also signed a non-binding proposal for the firm, and their price is claimed to be 30% greater than Blackstone’s, according to a Business Standard story.
Dr Reddy’s Laboratories shares began 1.1 percent down at Rs 5,589 per share.
So, what does Cipla bring to the table for Dr Reddy’s or Torrent with a ticket size of about Rs 60,000 crore, including an open offer at the present market price? To begin with, whomever acquires Cipla would be pushed to the top of the Indian pharmaceutical scoreboard.
Torrent Pharma, whose market worth is over 40% less than Cipla’s, is interested in the acquisition because it believes both businesses have complementary portfolios in India, with just around a 5% overlap.
Torrent would also have a stronger foothold in the US market, where Cipla is now five times larger than Torrent. According to Bernstein, the merged P&L will aid in bolder investments in biosimilars, specialty in the United States, and consumer health in India.
Dr Reddy’s market valuation is approximately 5% smaller than Cipla’s. While Dr Reddy’s US business is about twice as large as Cipla’s, the India business is far smaller.
In fact, the India business is considered to be one of Dr Reddy’s main draws. Cipla is now rated third, with a 5% market share and more than 20 brands in India’s Top 300. Dr. Reddy’s has around 16 brands in the top 300, is ranked 12th, and has a 3% market share. A united entity will not only allow Dr. Reddy’s to have access to Cipla’s trade generic and consumer health business, but it will also accelerate Dr. Reddy’s to become one of the top five drug producers in the country, a long-term goal for the firm.
Meanwhile, Cipla in today’s session is in the process of acquiring the South Africa-based consumer health and generic medicine company, Actor Pharma. The acquisition is priced at $48.6 million and will be done through its wholly-owned subsidiary in South Africa.
This is a’strategic purchase,’ according to the corporation, emphasizing its goal to capitalize on cost synergies in the South African market. Given Actor Pharma’s focus on the consumer-driven market and impending product releases, Cipla predicts a large boost in over-the-counter (OTC) revenue as a result of this purchase.
Cipla’s worldwide managing director and chief executive officer.
“This aligns with our strategy of expanding our OTC and wellness portfolio.” “We believe this is an excellent opportunity to leverage our existing marketing capabilities, unlock future growth opportunities, and optimize the performance of our pipeline,” said Umang Vohra, Cipla’s worldwide managing director and chief executive officer.
Cipla’s shares closed 0.5 percent down at Rs 1,238.85 on the National Stock Exchange on September 4.
The acquisition of Cipla is an intense competition that can change the scale of benefits the winner shall enjoy. Dr Reddy’s Labs entry in the race has only amped the competition up. Some insane prices will be offered to win the promoter’s stake in Cipla.
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