| Fri 5 Jun 2009, 13:30 | | CMP - Cipla Medpro - Withdrawal Of Firm Intention |
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CMP
CMP
CMP - Cipla Medpro - Withdrawal Of Firm Intention
CIPLA MEDPRO SOUTH AFRICA LIMITED
(formerly Enaleni Pharmaceuticals Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2002/018027/06)
(ISIN Number: ZAE000128179 Share Code: CMP)
("Cipla Medpro" or "the Company")
WITHDRAWAL OF FIRM INTENTION
- No offer was made and accordingly the Board of Directors of the
Company ("the Board") was under no obligation to respond in terms of
Adcock Ingram Holdings Limited`s ("Adcock") unilaterally imposed
timetable
- The Board of its own volition appointed an Independent Subcommittee
and Independent Financial Advisors, together with corporate, legal and
communications advisors, and was awaiting their advice to make a
considered decision which would have been communicated to shareholders
- Cipla Limited`s ("Cipla India") views on Adcock`s undesirability as a
potential business partner have been consistent throughout and were
clearly communicated to Adcock on numerous occasions, since December
2008
- Notwithstanding Adcock`s initial representations as to the minor
competition implications of the Proposed Transaction, the Company`s
initial view is that there are significant competition issues in the
Generic Market
- The Company`s relationship with Cipla India is long-standing and is
based on trust and mutual respect and this relationship underlies the
Company`s substantial growth over the recent years and provides an
innovative product pipeline
Introduction
1. Shareholders are referred to the announcement released on 2 June 2009 ("the
Announcement") by Adcock withdrawing Adcock`s proposal ("the Proposal") to
acquire the entire issued share capital of Cipla Medpro Limited ( "the
Proposed Transaction") as set out in Adcock`s firm intention announcement
on 9 April 2009 ("Firm Intention Announcement").
Adcock`s Proposal was not an Offer
2. There is no obligation on the Board to express an opinion on the Proposed
Transaction - no offer has been made by Adcock and the Board is accordingly
not required to respond to what has turned out to be a highly speculative
proposal.
3. There is moreover no requirement for the Board to abide by a timetable
dictated by Adcock which has elected not to make an offer to shareholders
but rather to await the fulfilment of several of its conditions before
doing so.
4. Notwithstanding this the Board appointed an Independent Subcommittee and
Independent Financial Advisors, together with corporate, legal and
communications advisors, to advise it were an offer to be made. The Board
was awaiting this advice in order to enable it to make a considered
decision which would have been communicated to shareholders.
5. The Board had previously considered a similar proposal by Adcock in its
Expression of Interest received in November 2008 and was thus not applying
itself to a Proposal of this nature for the first time.
6. Since Adcock`s Firm Intention was announced, the Company`s CEO and Chairman
have met separately with their respective counterparts from Adcock to
discuss the Proposed Transaction.
Cipla India`s Consistent Opposition from December 2008
7. Adcock claims that it has withdrawn the Proposal as a result of the
likelihood of the failure to fulfil a suspensive condition in its Firm
Intention Announcement relating to the support of Cipla India for the
Proposed Transaction ("the India Suspensive Condition"). Adcock moreover
claims that it "has been placed in an untenable position in relation to the
Proposed Transaction".
8. Adcock`s attempt to place the blame for the failure of the Proposed
Transaction on the Company based on Cipla India`s lack of support is
disingenuous and misleading.
9. It is important to understand the context of the Company`s relationship
with Cipla India, the latter`s attitude to the Proposed Transaction, and
Adcock`s knowledge thereof. As will become apparent below, Cipla India has
opposed Adcock`s Proposed Transaction since December 2008.
10. Shareholders are referred to the announcement released by the Company on
SENS on 4 May 2009 which quoted from a letter from Cipla India to Adcock
advising that "Cipla India Board, will not support your bid to purchase
Cipla Medpro SA Ltd now or at any time in the future" as Adcock was
"associated with companies in competition with" Cipla India, there was "no
compelling case to merge the two companies" and Cipla India viewed the
Company as "loyal partners and friends and we see no reason whatsoever to
change what has worked for both of us."
11. Notwithstanding this unequivocal statement, Adcock sent a request to Cipla
India on 28 May 2009, requesting that Cipla India address the issue of the
India Suspensive Condition contained in the Firm Intention Announcement and
Cipla India`s consent required for the fulfilment thereof.
12. Cipla India described Adcock`s letter as "rude and offensive" in that, in
addition to the abrupt and peremptory tone thereof, it implied that Cipla
India, and Mr Lulla in particular, had changed its stance over the course
of the transaction and ignored the previous communications of Cipla India`s
position to Adcock.
13. The Company reiterates that the relationship between the Company and Cipla
India is crucial to the future commercial success of the Company, providing
a continued pipeline of dossiers, and establishing a platform for the
continued growth of the Company, and that a transaction or development
which could result in the termination of this relationship or lead to a
material alteration of the existing agreement between the Company and Cipla
India would not be in the best interests of the Company or its
shareholders.
14. This was made clear to Adcock on 8 December 2008 in a reply by the Company
to an Expression of Interest received from Adcock - the Company explained
that the acquisition then proposed by Adcock "should have the support of
Cipla Limited" (Cipla India) and that such support or lack thereof was a
"fundamental consideration as to whether our board should possibly support
any such a transaction as being in the best interests of our company".
15. Upon approaching Cipla India on this matter in December 2008, the Company
was informed - and subsequently conveyed to Adcock - that "Cipla Limited
(Cipla India) has responded clearly and unequivocally that, and for a
number of reasons, it would not support any such transaction with your
company but moreover would be opposed thereto", and quoted Cipla India`s Mr
Amar Lulla to this effect.
16. Accordingly it was made very clear to Adcock in December 2008 that for a
number of reasons Adcock`s then proposed transaction was unacceptable,
including for the important consideration that it did not carry the support
of Cipla India.
17. Notwithstanding this, Adcock proceeded to issue its Firm Intention
Announcement in which it purported to desire the support and co-operation
of the Board despite failing to address the Board`s concerns.
18. There can accordingly be little doubt that Adcock embarked upon the
Proposed Transaction well aware of the opposition of Cipla India thereto,
which was also conveyed to Adcock by the Company`s CEO, Chairman, and
corporate advisors in separate interactions.
19. Adcock`s conduct during this process gave no basis to believe that Cipla
India would change its clearly expressed view. In particular,
- In making its Firm Intention public Adcock disregarded the previously
expressed views of Cipla India and their local partner, the Company;
- The CEO of Adcock has made statements in the media that although the
support of Cipla India for the Proposed Transaction was "first prize",
it was not required as the products supplied by Cipla India are "multi
source", and could be obtained from "other sources" - this ambiguous
attitude is quite contrary to the nature of the partnership and
relationship the Company has with Cipla India.
20. Adcock`s view that the Board ought to "persuade... Cipla India... to
reconsider its view" is surprising - it was Adcock who made the Proposed
Transaction conditional on the support of Cipla India, and there is no such
obligation on the Company or its Board. Indeed, Adcock`s expectation
places the Board directly at odds with the stated view of Cipla India and
disingenuously and incorrectly attempts to place the onus on the Board to
intercede on Adcock`s behalf.
Competition Concerns
21. Moreover, although Adcock was confident of attaining the necessary
approvals, the Company`s preliminary view is that there are significant
competitive concerns which could result in the Competition Commission ("the
Commission") prohibiting the implementation of the transaction on the basis
proposed in the Proposed Transaction. Any transaction which resulted in a
material reduction in choice for consumers would not be in the interests of
the public nor aligned with the Company`s values.
Relationship with Cipla India
22. The Company`s relationship with Cipla India, developed over the past
fifteen years, is based on mutual respect, trust and understanding of the
business requirements of both parties. This relationship has been recorded
in a Supply and Manufacturing Agreement entered into in 2005 between Cipla
India and Cipla Medpro (Proprietary) Limited, Cipla Life Sciences
(Proprietary) Limited and Medpro Pharmaceutica (Proprietary) Limited (all
wholly-owned subsidiaries of the Company), and an addendum thereto,
concluded on 1 November 2007 ("the Agreement").
23. The terms and conditions of the Agreement are not presently in issue as
Cipla India has stated that it refuses to do business with Adcock
"irrespective of any contractual niceties". In answer to certain
incorrect perceptions that have been quoted in the market, Cipla India has
no right of termination linked to a change of management of the Company.
Such rights as Cipla India may have relate to protecting their interests in
the event of a competitor taking control of the company without their
support and against their express wishes.
24. The position of Cipla India is based not on any contractual terms but on
its view of Adcock as an undesirable business partner and has remained
consistent throughout this process. Moreover, Adcock were well aware of
this position and embarked on this process, which has proved very costly
for the Company and a source of concern and uncertainty for staff, clients
and shareholders, in a cavalier manner.
Company Prospects
25. Over the past four years, the Company has grown to 3rd position in the
South African Generic Market with market leading positions in the
respiratory and neuropsychiatry categories, in a mutually beneficial
strategic partnership with Cipla India. The Company has also grown its
presence in the over the counter and agricare markets, and is launching new
complex molecule products in the fields of diabetes and oncology.
26. Working with Cipla India and its Black Economic Empowerment partners, the
Company is confident of its growth prospects in its domestic markets and
the rest of the continent.
The Board, individually and collectively, accept responsibility for the
information contained in this announcement and certify that to the best of their
knowledge and belief, the information contained in this announcement is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
Cape Town
5 June 2009
Investment Bank, Corporate Advisor and Sponsor
Nedbank Capital
Corporate Law Advisors
Taback and Associates (Pty) Ltd
Independent Financial Advisors
PriceWaterhouseCoopers Corporate Finance (Proprietary) Limited
Communications Advisors
College Hill Associates
Date: 05/06/2009 13:30:01 Produced by the JSE SENS Department.
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