| Fri 22 Jun 2012, 16:15 | | CMP - Cipla Medpro South Africa Limited - Settlement reached with RBSA and |
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CMP
CMP
CMP - Cipla Medpro South Africa Limited - Settlement reached with RBSA and
confirmation of cautionary in respect of ongoing discussions
Cipla Medpro South Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/018027/06)
Share code: CMP
ISIN: ZAE000128179
(the "Company", "Cipla Medpro")
SETTLEMENT REACHED WITH RBSA AND CONFIRMATION OF CAUTIONARY IN RESPECT OF
ONGOING DISCUSSIONS
Further to the announcement dated 27 October 2010 in which shareholders were
advised of arbitration proceedings between Reckitt Benckiser (SA)
(Proprietary) Limited ("RBSA") and Cipla Medpro in relation to a claim of
approximately R300 million by RBSA (which was subsequently increased to
approximately R332 million) and a counter claim of approximately R280
million by the Company arising from a manufacturing agreement entered into
in 2003 and relating to the temporary closure in 2007 of its factory in
Durban by the Medicines Control Council ("the Claims"), whilst it was still
named Enaleni Pharmaceuticals, shareholders are advised as follows:
* The Arbitration proceedings (which commenced in Cape Town in April
2012, and which have run for some 7 weeks) have been settled by
agreement between the Company and RBSA;
* The agreement was approved by the Company`s Board ("the Board")
after consultation with and on the recommendation of its external
legal counsel;
* The salient terms of the agreement are:
- The Company will pay a settlement amount of R80 million to
RBSA in full and final settlement of certain of RBSA`s
claims, such settlement amount to be paid in three tranches
as follows:
R30 million by 3 July 2012;
R30 million by 31 July 2013; and
R20 million by 30 January 2014;
- The Company will abandon its counter claims against RBSA
(which includes receivables reflected in its books as due by
RBSA, in the amount of R37 million), and RBSA will likewise
abandon the remainder of its claims.
* As such, the settlement is a full and final settlement of the
arbitration proceedings and all and any claims between the Company
and RBSA;
* The amount to be paid represents compensation by the Company to
RBSA for the higher cost to RBSA of procuring alternative supplies
of the products the Company would otherwise have supplied to it,
had its manufacturing facility not temporarily closed for the
reasons above, and whilst it underwent a necessary upgrade to
international manufacturing requirements and standards.
The Company has sought specialist accounting advice on the appropriate
accounting treatment of the above settlement. Such advice is that:
* Notwithstanding that evidence as to the actual potential extent of
the liability only came to light after 31 December 2011 and the
finalisation of the provisional financial statements for the
period ending 31 December 2011 ("Provisional Financial
Statements"), the underlying potential liability to RBSA was in
existence at 31 December 2011;
* The Board had not, as at the date of approval of the settlement
agreement, approved the integrated annual report, including the
group annual financial statements ("Integrated Report"), for the
period ending 31 December 2011;
* The appropriate and correct accounting treatment for the
settlement is to:
- Account for the settlement in the accounting period ending 31
December 2011; and
- Restate the Provisional Financial Statements for the period
ending 31 December 2011, which were released by the Company
on SENS on 15 March 2012.
Shareholders are advised that the Company expects earnings per share ("EPS")
and headline earnings per share ("HEPS") for the year ended 31 December 2011
to be between 20% and 25% lower than the EPS of 80.8 cents and HEPS of 80.8
cents as disclosed in the Provisional Financial Statements.
The above information has not been reviewed or reported on by Cipla Medpro`s
auditors and the Company will accordingly, on or about 29 June 2012, issue
revised Provisional Financial Statements for the period ending 31 December
2011. The Company`s draft Integrated Report will be revised to reflect the
above changes as a matter of urgency. These changes will cause the
finalisation and issue of the Integrated Report to be delayed and the
Company will use its best endeavours to issue it within the six month period
ending 30 June 2012 as required by the JSE Limited Listings Requirements.
Further to the renewal of the cautionary announcement dated 20 June 2012,
shareholders are advised that discussions continue which, if successfully
concluded, may have a material effect on the price of the Company`s
securities. Accordingly, shareholders are advised to continue exercising
caution when dealing in the Company`s securities until a further
announcement is made.
Bellville
22 June 2012
Sponsor
Nedbank Capital
Date: 22/06/2012 16:15:01 Produced by the JSE SENS Department.
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