S Radhakrishnan, ED, Cipla explains to CNBC-TV18 that the company is in discussions to acquire a 51 percent stake in Cipla Medpro, South Africa for a consideration of USD 220 million. The acquisition also offers a stake in Cipla Medpro business in South Africa.
Below is an edited transcript of the interview on CNBC-TV18
Q: Can you explain the reason for interest in the acquisition and what it entails in terms of financial outlay?
A: To clarify, we are in preliminary discussions and I have made an indicative proposal of acquiring approximately a 51 percent equity stake in Cipla Medpro South Africa and the total outlay for the acquisition of 51 percent will be about USD 220 million. Cipla Medpro substantially procures and markets our products and logically, it is good to now integrate with our frontend and that is why we are proposing to make this acquisition.
Q: What is your current stake in Medpro?
A: We do not have any stake as of now. We supply our products to them which they market.
Q: What is the logic behind this USD 220 million outlay? What would it give you access to in terms of the kind of revenues that you have in South Africa today?
A: We supply products to them and they market the Cipla brand in South Africa. So this really gives us a stake in our own brands in South Africa and the company is worth over USD 200 million. The acquisition also allows us a stake in Cipla Medpro’s business in South Africa.
Q: Can breakdown the financials of the South African business?
A: Roughly, this company is a over-USD 200 million company and posted a bottom-line of USD 40 million last year.
Q: Would the entire USD 220 million be financed from accruals?
A: Yes, it would be financed through accruals.