Saturday, June 6, 2009

Cipla Medpro SA hits out at hostile takeover bid

The attempt by South African pharmaceutical manufacturer Adcock Ingram to place the blame for the failure of the proposed buyout of Cipla Medpro South Africa (CMSA) on Cipla India's lack of support was "disingenuous and misleading", CMSA said here Friday.

In a hard-hitting statement released via the Johannesburg Securities Exchange, following Adcock's decision to call off the bid, CMSA said Cipla India's views on Adcock's undesirability as a potential business partner have been consistent throughout and were clearly communicated to Adcock on numerous occasions, since December 2008.

Adcock had cited Cipla India's reported threat to discontinue a long-term supply pipeline to CMSA if there was new management at CMSA.

But CMSA said that this was this was not correct: "Cipla India has no right of termination linked to a change of management of the Company. Such rights as Cipla India may have relate to protecting their interests in the event of a competitor taking control of the company without their support and against their express wishes."

CMSA said this had been repeatedly made very clear to Adcock, which had nonetheless persisted with its offer and insisted on getting this condition lifted.

"Cipla India described Adcock's letter (of 28 May 2009) as "rude and offensive" in that, in addition to the abrupt and peremptory tone thereof, it implied that Cipla India, and (its chief executive) Amar Lulla in particular, had changed its stance over the course of the transaction and ignored the previous communications of Cipla India's position to Adcock," continued CMSA's statement.

"(CMSA) reiterates that the relationship between the company and Cipla India is crucial to the future commercial success of the company, providing a continued pipeline of dossiers, and establishing a platform for the continued growth of the company, and that a transaction or development which could result in the termination of this relationship or lead to a material alteration of the existing agreement between the company and Cipla India would not be in the best interests of the company or its shareholders. "

CMSA also said that although Adcock was confident of securing the necessary regulatory approvals, the company's preliminary view was that there were significant competitive concerns which could have resulted in the South African Competition Commission prohibiting the implementation of the transaction on the basis that it would result in a material reduction in choice for consumers, which would not be in the interests of the public.

"The position of Cipla India is based not on any contractual terms but on its view of Adcock as an undesirable business partner and has remained consistent throughout this process.

"Moreover, Adcock were well aware of this position and embarked on this process, which has proved very costly for the company and a source of concern and uncertainty for staff, clients and shareholders, in a cavalier manner."

"Over the past four years, CMSA has grown to third position in the South African Generic Market with market leading positions in the respiratory and neuropsychiatry categories, in a mutually beneficial strategic partnership with Cipla India. Working with Cipla India and its Black Economic Empowerment partners, CMSA is confident of its growth prospects in its domestic markets and the rest of the continent.

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