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Cipla Stake Sale Plan Faces Indecision Amidst Valuation Disagreements

Written by : Nikita Saha

October 10, 2023

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The potential stake sale is facing uncertainty with prospective buyers expressing reluctance due to the $13.1 billion valuation set by the founding family members.

The ongoing buzz surrounding the Cipla acquisition has taken a new turn, with promoters' disagreements on the company's valuation figure.

The potential sale of a stake in Cipla Ltd is facing uncertainty with prospective buyers expressing reluctance due to the $13.1 billion valuation set by the founding family members.

This difference in views on the company's valuation could potentially lead to delays in finalising the deal, as reported by the Economic Times.

Earlier we reported that the Cipla promoter group, controlling around 33% of the company's shares, was a unified front. However, the scenario seems to have changed, with the 8% promoter group now holding divergent opinions on certain matters.

Reports suggest that family members could sell some or all of their stakes in Cipla. Such a move would trigger an open offer for an additional 26% of the company, potentially resulting in a new owner holding as much as 59.4% of Cipla. This development could surpass Sun Pharma's $4 billion acquisition of Ranbaxy from Daichii in 2014.

Additionally, Cipla had been in discussion with an advisor and four to five large PE funds, most of whom are seeking for a complete buyout of the promoter stake. However, the high valuation demanded by the founding family has led to reluctance among potential buyers

Sharing a quick recap of the entire story, the Ahmedabad-based Torrent Pharma was engaged in talks with investment firms including Luxembourg's CVC Capital Partners, Brookfield, Apollo Global Management and Bain Capital, to raise funding aiming for around $1.2-1.5 billion each. While, the total assemblage was of the $7 billion financial package that Torrent was working on to acquire its rival company Cipla.

Later, Cipla, the country's third-largest drugmaker, came to the field to sell its 60% stake. Discussions were held with Torrent Pharmaceuticals as well as a group of buyout firms led by BPEA EQT and General Atlantic.

Bernstein analysts had initially estimated the deal to touch the $7 billion mark, however, the demand by the Cipla family to raise the bar to $13 billion has sparked disagreements among the promoters. This remains to be seen whether the final deal will indeed settle at $13 billion or if this story takes any new turn.

As of mid-September, the market value of Cipla was hovering at the INR 1 Lakh Cr range. The promoter stake alone was valued at INR 33,389 Cr ($4.02 billion) at this price.

Shares of Cipla were down 0.27% at 11:29 am on the NSE at INR 1,156.45 a share.

In another related event, the global healthcare company Cipla launched CiplaMed 2.0 in August this year. The initiative offers reliable and latest updates to medical professionals. The platform is an advanced version of an industry-leading knowledge platform that provides information to the medical fraternity.


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