Indian drug producer Cipla plans to buy a 51 percent stake in South Africa’s Cipla Medpro, in order to grow its position in the African generic drug market.
The Indian company hopes to make a bid worth $215 million – bidding 8.55 rand ($0.95) a share – for the majority stake in the South African drug supplier, in its first stockholding in the company which it has a substantial history with.
Cipla is an established supplier of generic HIV and cancer drugs to Cipla Medpro, which distributes the drugs across emerging markets.
Cipla Medpro will respond to the offer only when it has received a formalised bid, reports Reuters.
The proposed acquisition sees the Indian firm position itself for success on the African continent – which boasts the fastest population growth in the world and as such provides a ripe market for cheap and generic drug sales.
Speaking to Reuters, Nic Norman-Smith, chief investment officer at Lentus Asset Management in Johannesburg notes that Africa will be the focal point over the coming period for companies in all industry sectors, given the growth potential the continent provides.
“Like most industries with a heavy focus on developed markets, pharmaceuticals are struggling to find growth. Many are looking to Africa to build up their distribution pipeline, ” Norman-Smith says, adding: “It’s not surprising that Cipla are trying to consolidate their position in South Africa.”
In a similar positioning project, drug producer GlaxoSmithKline has also launched an expansion push across the African continent in a bid to steal market share over the next five years. In order to do so the British producer has slashed its drugs prices in order to achieve dominance on the market.
According to Reuters, the 8.55 rand ($0.95) offer values Cipla Medpro well above – approximately 11 per cent higher than – its trading price as at close of play on Tuesday, valuing the South African producer at 3.8 billion rand ($423 million).