| Tue 10 Jul 2012, 7:05 | | Adcock Ingram Hldgs Ltd - ACQUISITION OF CERTAIN ASSETS OF COSME FARMA LABORATORIES LIMITED (INDIA) |
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AIP
ACQUISITION OF CERTAIN ASSETS OF COSME FARMA LABORATORIES LIMITED (INDIA)
AdcockA IngramA HoldingsA LimitedA
(RegistrationA numberA 2007/016236/06)A
(IncorporatedA inA theA RepublicA ofA SouthA Africa)A
ShareA code:A AIPA
ISIN:A ZAE000123436A
("AdcockA Ingram"A orA "theA Company"A orA "theA Group")A
A
ACQUISITIONA OFA CERTAINA ASSETSA OFA COSMEA FARMAA LABORATORIESA LIMITEDA (INDIA)A
A
1. IntroductionA A A
A
AdcockA IngramA HealthcareA PrivateA Limited,A aA whollyA ownedA subsidiaryA withinA theA AdcockA IngramA
GroupA registeredA inA India,A hasA reachedA agreementA toA acquireA certainA assetsA ofA CosmeA FarmaA
LaboratoriesA LimitedA ("Cosme"),A aA pan-IndianA pharmaceuticalA companyA basedA inA Goa,A IndiaA (theA
'Transaction').A CosmeA isA aA divisionA ofA theA CosmeA Group,A aA diversifiedA family-ownedA business,A headedA
byA MrA CosmeA Menezes,A aA prominentA figureA inA theA pharmaceuticalA marketA inA India.A A TheA CosmeA divisionA
hasA beenA operatingA inA theA IndianA domesticA pharmaceuticalA marketA forA theA pastA 40A years.A
A
2.A NatureA ofA Cosme'sA businessA A
A
CosmeA isA aA mid-sizedA salesA andA marketingA pharmaceuticalA businessA withA officesA andA operationsA inA GoaA
andA Mumbai,A India.A CosmeA isA rankedA 55thA outA ofA theA approximatelyA 5,000A registeredA pharmaceuticalA
companiesA inA India,A perA IMSA Health.A A ItA hasA aA salesA forceA ofA approximatelyA 1,000A staffA thatA providesA
nationwideA coverageA toA approximatelyA 150,000A physicians.A CosmeA hasA distributionA capabilitiesA inA 27A
statesA inA India.A CosmeA hasA aA portfolioA ofA productsA inA severalA therapeuticA classes,A keyA beingA
Gynaecology,A Gastro-Intestinal,A DermatologyA andA Orthopaedic.A A
A
3.A RationaleA
A
IndiaA isA aA leaderA andA keyA participantA inA theA globalA pharmaceuticalA marketA providingA globalA andA localA
pharmaceuticalA companiesA withA manufacturing,A regulatory,A researchA andA developmentA capabilities.A
SouthA AfricaA andA IndiaA areA countriesA withA strongA historicalA andA economicA relationshipsA datingA backA
centuries,A which,A coupledA withA theA currentA tradeA agreementsA andA strongA domesticA growth,A makesA
IndiaA anA attractiveA investmentA destinationA forA AdcockA Ingram.A
A
InA 2007A AdcockA IngramA formallyA enteredA theA IndianA marketA throughA aA manufacturingA jointA ventureA
withA aA localA IndianA pharmaceuticalA company.A InA JulyA 2011A AdcockA IngramA openedA aA regulatoryA andA
administrativeA supportA officeA inA BangaloreA toA provideA backA officeA supportA toA itsA AfricanA operationsA andA
importantlyA toA facilitateA theA establishmentA ofA aA domesticA pharmaceuticalA business.A A A
A
TheA rationaleA forA theA TransactionA isA detailedA below:A
A
' AccessA toA theA high-growthA IndianA pharmaceuticalA marketA withA currentA spendA onA pharmaceuticalsA
ofA circaA USD16A billion.A TheA IndianA pharmaceuticalA marketA isA forecastA byA IMSA toA growA atA aA
compoundA annualA growthA rateA ofA 16%A fromA 2011A toA 2016.A A
' CosmeA hasA aA productA portfolioA inA growthA segments,A suchA asA DermatologyA andA Gynaecology.A
CosmeA andA itsA productsA haveA beenA presentA inA theA IndianA marketA forA overA 40A years,A creatingA equityA
inA theA brands.A A
' ExtensiveA salesA andA distributionA capabilityA acrossA India,A withA accessA toA circaA 150,000A physicians,A
providingA aA strongA platformA forA newA productA launchesA andA eventualA exposureA toA AdcockA IngramA
brands.A
' TheA IndianA GovernmentA hasA recentlyA proposedA aA policyA toA increaseA theA availabilityA ofA freeA genericA
medicineA toA itsA people,A whichA ifA implementedA couldA changeA theA livesA ofA hundredsA ofA millions,A andA
furtherA improveA theA environmentA forA genericA companiesA operatingA inA India.A A
A
AdcockA IngramA isA committedA toA theA IndianA marketA andA willA continueA toA investA intoA itsA sales,A
distribution,A manufacturingA andA developmentA capabilitiesA toA provideA aA world-classA infrastructureA andA
products.A ThisA willA allowA AdcockA IngramA toA buildA onA theA heritageA createdA byA theA MenezesA familyA andA
continueA toA provideA qualityA andA affordableA medicinesA toA theA peopleA ofA India.A
A
4.A CategorisationA ofA TransactionA
A
InA termsA ofA theA JSEA ListingsA Requirements,A theA TransactionA isA categorisedA asA aA CategoryA 2A transaction.A A A
A
5.A DetailsA ofA theA TransactionA
A
AdcockA IngramA willA acquireA certainA intangibleA assets,A relatedA toA Cosme'sA domesticA formulations,A
exportA andA institutionalA business,A whichA willA includeA butA notA beA limitedA to:A trademarks,A pharmaceuticalA
dossiers,A marketingA know-how,A customerA relationships,A supplierA relationships,A andA manufacturingA andA
technicalA know-how.A TheseA intangibleA assetsA willA beA acquiredA fromA CosmeA andA twoA otherA groupA
companies,A namelyA CosmeA RemediesA LimitedA andA CosmeA PharmaceuticalsA Limited.A A A A
A
AA limitedA numberA ofA movableA tangibleA assetsA willA beA acquiredA underA theA agreement.A
A
TheA purchaseA priceA isA INRA 4,800,000,000A (IndianA RupeesA FourA BillionA EightA HundredA Million)A orA
approximatelyA ZARA 708A million.A VATA ofA INRA 240,000,000A (IndianA RupeesA TwoA HundredA andA FortyA
Million)A orA approximatelyA ZARA 35A million,A andA stampA dutyA ofA INRA 240,000,000A (IndianA RupeesA TwoA
HundredA andA FortyA Million)A orA approximatelyA ZARA 35A millionA areA payableA onA theA purchaseA price.A TheA
aboveA amountsA haveA beenA basedA onA ZAR/INRA exchangeA rateA ofA 0.1474A asA atA MondayA 9A JulyA 2012.A
(Source:A Bloomberg).A A
A
TheA purchaseA priceA willA beA settledA inA cashA withA anA initialA upfrontA paymentA ofA 90%A andA theA remainingA
10%A withheldA forA 6A monthsA inA anA escrowA account,A asA securityA forA possibleA breachesA ofA warranties.A
A
TheA effectiveA dateA ofA theA TransactionA shallA beA theA 5thA businessA dayA followingA theA fulfilmentA orA waiverA ofA
allA conditionsA precedentA asA contemplatedA inA paragraphA 6A below,A whichA isA anticipatedA toA beA noA laterA
thanA 31A OctoberA 2012.A A
A
6.A ConditionsA precedentA A
A
TheA TransactionA isA subjectA toA theA fulfilmentA orA waiver,A whereA applicable,A ofA aA limitedA numberA ofA
conditionsA precedentA normalA forA aA transactionA ofA thisA nature,A includingA allA requisiteA regulatoryA
approvalsA inA bothA IndiaA andA SouthA AfricaA suchA as,A butA notA limitedA to,A theA SouthA AfricanA ReserveA Bank,A
theA IndianA ForeignA InvestmentA PromotionA BoardA andA theA CompetitionA CommissionA ofA India.A
A
7.A ProA formaA financialA effectsA A
A
TheA unauditedA proA formaA financialA effectsA ofA theA TransactionA setA outA belowA haveA beenA preparedA toA
assistA AdcockA IngramA shareholdersA inA assessingA theA impactA ofA theA TransactionA onA theA Group`sA historicalA
earningsA perA shareA ("EPS"),A headlineA earningsA perA shareA ("HEPS"),A netA assetA valueA ("NAV")A perA shareA
andA netA tangibleA assetA valueA ("NTAV")A perA share.A TheA proA formaA financialA effectsA areA theA responsibilityA
ofA theA directorsA ofA AdcockA IngramA andA areA providedA forA illustrativeA purposesA only.A
A
TheA proA formaA financialA effectsA haveA beenA preparedA onA theA basisA thatA theA transactionA hadA beenA fullyA
implementedA onA 1A OctoberA 2011A forA purposesA ofA theA StatementA ofA ComprehensiveA IncomeA andA asA atA
31A MarchA 2012A forA purposesA ofA theA StatementA ofA FinancialA Position.A ItA doesA notA purportA toA beA
indicativeA ofA whatA theA consolidatedA financialA resultsA wouldA haveA beenA hadA theA TransactionA beenA
implementedA onA aA differentA date.A TheA materialA assumptionsA areA setA outA inA theA notesA followingA theA
table.A DueA toA theirA nature,A theA proA formaA financialA effectsA mayA notA fairlyA presentA theA financialA position,A
changesA inA equity,A resultsA ofA operationsA orA cashA flowsA ofA AdcockA IngramA afterA theA Transaction.A A
A
A BeforeA theA AfterA theA PercentageA
Transaction(1)A Transaction(2)A changeA A
EPSA (cents)A 198.4 197.5(3&4)A A -0.45%
HEPSA (cents)A 198.7 197.8(3&4)A -0.45%
NAVA perA shareA (cents)A 1,883.5 1,883.5(5)A 0%
NTAVA perA share (cents)A 1,457.1A 1,014.5(5)A A -30.4%
WeightedA averageA numberA ofA sharesA inA issue 168,981,608 168,981,608(6)A 0%
A
A A
A
Notes:A A A
1. ExtractedA fromA AdcockA Ingram`sA publishedA andA unauditedA interimA resultsA forA theA 6-monthA periodA
endedA 31A MarchA 2012.A
A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A
2. BasedA onA theA purchaseA priceA ofA theA TransactionA andA Cosme'sA unauditedA resultsA forA theA 6-monthA
periodA endedA 31A MarchA 2012.A Cosme'sA netA profitA beforeA taxA forA theA 6-monthA periodA isA RA 29.1m.A
A
3. ForA theA purposesA ofA calculatingA theA proA formaA StatementA ofA ComprehensiveA Income,A Cosme'sA
unauditedA IndianA RupeeA denominatedA resultsA haveA beenA translatedA atA anA exchangeA rateA ofA
0.1548,A beingA theA averageA exchangeA rateA forA theA 6-monthA periodA endedA 31A MarchA 2012.A
A
4. ProA formaA EPSA andA HEPSA includeA once-offA transactionA costsA ofA approximatelyA R5A million.A
A
5. ForA theA purposesA ofA calculatingA theA proA formaA StatementA ofA FinancialA Position,A Cosme'sA unauditedA
IndianA RupeeA denominatedA resultsA haveA beenA translatedA atA anA exchangeA rateA ofA 0.1484,A beingA theA
spotA rateA atA 31A MarchA 2012.A
A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A
6. TheA weightedA averageA numberA ofA sharesA inA issueA isA basedA onA theA principleA thatA theA TransactionA
wasA effectiveA onA 1A OctoberA 2011,A asA extractedA fromA AdcockA Ingram`sA publishedA andA unauditedA
interimA resultsA forA theA 6-monthA periodA endedA 31A MarchA 2012.A
A
7. NoA chargeA forA amortisationA ofA intangibleA assetsA acquiredA pursuantA toA theA TransactionA hasA beenA
includedA inA theA proA formaA financialA effects.A AnyA intangibleA assetsA acquired,A thatA areA determinedA toA
haveA finiteA usefulA lives,A willA needA toA beA amortised.A AnyA amortisationA chargeA thatA arisesA fromA theseA
intangibleA assetsA willA haveA theA effectA ofA reducingA theA proA formaA EPSA andA HEPSA calculatedA above.A
BasedA uponA theA factA thatA almostA allA assetsA beingA acquiredA areA intangibleA byA nature,A anyA reductionA
resultingA fromA theA amortisationA chargeA couldA beA materialA inA relationA toA theA figuresA disclosedA
above.A
A
8. TheA proA formaA financialA effectsA haveA beenA preparedA usingA theA sameA accountingA policiesA asA thoseA
appliedA inA theA mostA recentlyA publishedA annualA financialA statementsA ofA AdcockA Ingram.A A
A
MidrandA
10A JulyA 2012A
SponsorA
DeutscheA SecuritiesA (SA)A ProprietaryA Limited
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