Natco Pharma Ltd., on Wednesday said it has made a cash offer to buy out minority shareholders' 35.75% stake in South Africa's Adcock Ingram Holdings Ltd. for approximately ZAR 4 billion (Rs 2,000 crore). The transaction aims to give the Indian generic drug maker a significant strategic footprint into South Africa, which the company views as a gateway to the broader African continent.
The Hyderabad-based company has made an offer to minority shareholders of Adcock Ingram at a cash price of ZAR 75.00 ($4.27) per share. The deal, which includes Natco's prior 0.80% holding, would make it the second-largest shareholder in the Johannesburg-listed pharmaceutical firm, behind the Bidvest Group, which will hold the remaining 64.25%.
"The proposed transaction will provide Natco Pharma with a well-established entry into the Southern African market," said Rajeev Nannapaneni, CEO & Vice Chairman of Natco Pharma. "It will also allow Natco Pharma to tap into new revenue streams...while providing a gateway to the African continent".
Nannapaneni told Moneycontrol that the deal will be funded through internal accruals.
The deal is expected to create significant synergies for both companies. Adcock Ingram will gain access to Natco's extensive research and development programs, intellectual property, and experience in regulated markets. In return, Natco gains a partnership with a company that boasts a 10% share of the private pharmaceutical market in South Africa and is the largest supplier of hospital and critical care products in the nation.
Valued at an estimated R11 billion ($632 million), Adcock Ingram is a veteran in the South African market, founded in 1890. The company generated revenues of ZAR 9.6 billion ($536 million) for the financial year ending in June 2024 and holds the second-largest market share in South Africa's private and public pharmaceutical sector.
Post-transaction, Adcock Ingram will be delisted from the Johannesburg Stock Exchange (JSE) and will continue to operate as a private business. The deal is expected to enhance Adcock's market share and cost-competitiveness by leveraging Natco's research and development capabilities, intellectual property, and global marketing experience.
"This offer represents a huge vote of confidence in Adcock Ingram’s people, brands and business model," said Andrew Hall, CEO of Adcock Ingram.
The boards of both Natco Pharma and Adcock Ingram have approved the transaction. The deal is subject to regulatory approvals, including from the Reserve Bank of India and South Africa's Takeover Regulation Panel. The acquisition is expected to be completed within four months, assuming no regulatory delays.
In a related move, Natco’s board also approved the incorporation of a wholly-owned subsidiary in South Africa, NATCO Pharma South Africa Proprietary Limited, with an investment of up to Rs 2,100 crore, and the liquidation of its subsidiary, M/s. Time Cap Overseas Limited.
Shares of Natco Pharma rose 1.99% to close at Rs 1034.50 on BSE on Wednesday, the benchmark Sensex gained 0.66% to end at 82,726.64 points. On July 22, Adcock Ingram shares were trading nearly 10% higher. The stock trades at PE of 10 with market cap of nearly Rs 4,500 crore. It has three plants in South Africa, two plants in India under joint venture.
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