Blackstone, the world's largest private equity firm, which recently hit $1 trillion in AUM (assets under management) has submitted a non-binding bid along with its LPs (limited partners) to acquire control in pharma major Cipla with the promoter Hamied family in stake sale mode, multiple industry sources told Moneycontrol.
Investors, who commit capital to a private equity firm are called LPs. They typically consist of pension funds, institutional accounts and wealthy individuals.
It was not immediately clear if Blackstone is the solo bidder in the ongoing process.
On July 27, 2023, Moneycontrol was the first to report that Cipla's promoters were in talks with private equity firms like Blackstone and BPEA EQT to explore a stake sale and the move is seen as a step towards succession planning for the iconic firm set up in 1935.
Also read: Cipla promoters said to explore stake sale to Blackstone, Baring Asia
If the deal fructifies, it would be the biggest ever private equity transaction in India Inc.
At the end of the day's trade on August 9, Cipla's market cap stood at Rs 1,02,198.82 crore and at these levels, the total 33.47 per cent stake of the Hamied family is valued at Rs 34,205 crore. The open offer trigger would push the total deal size higher.
"Yes. Blackstone has submitted a non-binding bid with the support of its LPs. Arguably, they have made the maximum returns in India as well as deployed the maximum capital. They are extremely keen on the pharma space and are not tying up with any other private equity firms," said one of the persons mentioned above.
The person added that other PE firms are likely to have made attempts to partner with pharma strategics for a bid, considering the size of the cheque and factors like synergy extraction, but did not elaborate on the outcome of those discussions.
According to the Blackstone website, the firm invests on behalf of the world's largest institutional investors, including endowments, sovereign wealth funds and pension funds that provide retirement benefits for over 92 million teachers, firefighters, nurses and others.
Two other persons confirmed the non-binding bid submission by Blackstone along with LPs and added that they were not aware of any other bid submission as yet by a separate suitor.
One of them alluded to the possibility of pension funds or sovereign funds (which invest directly and also indirectly as LPs) backing a consortium bid while the other highlighted the complexities of consortium bids involving PE funds, which have different investment horizons.
Reports have also named Qatar Investment Authority (QIA) as an interested suitor for the Cipla promoter stake. KKR, Advent International, TPG, Bain Capital, Warburg Pincus, Carlyle and Chrys Capital are some of the private equity firms, which have expressed interest in the domestic pharma sector in the past but none of the previous cheque sizes come close to the proposed Cipla deal.
A fourth person told Moneycontrol that in case the sale process for the entire stake of the Hamied family does not proceed as desired, then if desired, the Hamied family has the option to explore the monetisation of a partial stake via the block deals or the open market route.
"There is capital market support and interest. If they want, they can do a couple of block trades and pocket a significant amount," the person added.
The Cipla stock has risen nearly 25 per cent in the last month and hit record highs. The firm currently trades at around 17 times EV/EBIDTA.
All four persons above spoke to Moneycontrol on the condition of anonymity.
Blackstone declined to comment on the matter. Moneycontrol is awaiting an email response from Cipla and has sent multiple reminders.
During his speech at Cipla's 87th annual general meeting
(after the original version of this article was published), Cipla Chairman YK Hamied said, "I would like to inform you as the Chairman of Cipla, that all the news that you are hearing is speculative and all the clarifications for this have been made to the stock exchange. And whatever information given to the stock exchange is in public domain and is public knowledge."
According to information available on the BSE, the 66.53 per cent non-promoter shareholding of Cipla is distributed between foreign institutions at 25.49 percent, including the Govt of Singapore and Government Pension Fund Global and 24.34 percent with domestic institutions, including LIC (3.47 percent) and other entities.
A Moneycontrol report on July 27 added that with the second-generation promoters, YK Hamied and MK Hamied, Chairman and Vice-Chairman of Cipla, respectively being octogenarians and Samina Hamied, Executive Vice-Chairperson being the only member from the second generation to lead Cipla, the company needs a clear succession roadmap.
On August 1, the Economic Times reported that Blackstone was preparing to bid for the entire 33.47 percent promoter stake in Cipla.
Blackstone and Indian pharma
Blackstone invested in Pune-based Emcure Pharma back in 2006 and sold its minority stake in the firm to Bain Capital in 2013. The private equity behemoth has a war chest of $11bn to target companies for deals in Asia and in January 2022, closed a second Asian-focused private equity fund.
Last year, Blackstone was seen as the frontrunner to pick up a majority stake in the injectable business of Aurobindo Pharma but that transaction hit a hurdle over deal structure and valuations.
Also read: Blackstone-Aurobindo Pharma talks over injectable business stake sale hit hurdle
"The fundamentals for long-term growth in India are outstanding. For us in India, the best is yet to come..we control $50 billion of assets here," Jonathan Gray, President, Blackstone said during a media interaction in Mumbai in February.
Also read: 'Fundamentals for long-term growth in India are outstanding': Blackstone's Jonathan Gray
The investment behemoth is the largest owner of commercial and retail real estate in India and has been investing in India since 2006. It has a presence in sectors ranging from IT services and asset & wealth management to auto components and online learning.
India is considered the top-performing market globally for Blackstone Private Equity with investments in Mphasis, VFS, TaskUs, IBS Software, Xpressbees and Simplilearn. The firm sold Aakash Educational Services to edtech major Byju's last year.
Also Read: Cipla's impending 'takeover' by Blackstone should sadden all of us: Jairam Ramesh
(This article has been updated with the Cipla chairman's comments)
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
