| Tue 10 Jul 2012, 16:13 | | Adcock Ingram Hldgs Ltd - ACQUISITION OF CERTAIN ASSETS OF COSME FARMA LABORATORIES LIMITED (INDIA) |
|
AIP
ACQUISITION OF CERTAIN ASSETS OF COSME FARMA LABORATORIES LIMITED (INDIA)
THERE IS NO CHANGE TO THE CONTENT OF THIS ANNOUNCEMENT FROM THE ONE PUBLISHED
ON THE JSE WEBSITE EARLIER TODAY
Adcock Ingram Holdings Limited
(Registration number 2007/016236/06)
(Incorporated in the Republic of South Africa)
Share code: AIP
ISIN: ZAE000123436
("Adcock Ingram" or "the Company" or "the Group")
ACQUISITION OF CERTAIN ASSETS OF COSME FARMA LABORATORIES LIMITED (INDIA)
1. Introduction
Adcock Ingram Healthcare Private Limited, a wholly owned subsidiary within the Adcock Ingram
Group registered in India, has reached agreement to acquire certain assets of Cosme Farma
Laboratories Limited ("Cosme"), a pan-Indian pharmaceutical company based in Goa, India (the
"Transaction"). Cosme is a division of the Cosme Group, a diversified family-owned business, headed
by Mr Cosme Menezes, a prominent figure in the pharmaceutical market in India. The Cosme division
has been operating in the Indian domestic pharmaceutical market for the past 40 years.
2. Nature of Cosme's business
Cosme is a mid-sized sales and marketing pharmaceutical business with offices and operations in Goa
and Mumbai, India. Cosme is ranked 55th out of the approximately 5,000 registered pharmaceutical
companies in India, per IMS Health. It has a sales force of approximately 1,000 staff that provides
nationwide coverage to approximately 150,000 physicians. Cosme has distribution capabilities in 27
states in India. Cosme has a portfolio of products in several therapeutic classes, key being
Gynaecology, Gastro-Intestinal, Dermatology and Orthopaedic.
3. Rationale
India is a leader and key participant in the global pharmaceutical market providing global and local
pharmaceutical companies with manufacturing, regulatory, research and development capabilities.
South Africa and India are countries with strong historical and economic relationships dating back
centuries, which, coupled with the current trade agreements and strong domestic growth, makes
India an attractive investment destination for Adcock Ingram.
In 2007 Adcock Ingram formally entered the Indian market through a manufacturing joint venture
with a local Indian pharmaceutical company. In July 2011 Adcock Ingram opened a regulatory and
administrative support office in Bangalore to provide back office support to its African operations and
importantly to facilitate the establishment of a domestic pharmaceutical business.
The rationale for the Transaction is detailed below:
* Access to the high-growth Indian pharmaceutical market with current spend on pharmaceuticals
of circa USD16 billion. The Indian pharmaceutical market is forecast by IMS to grow at a
compound annual growth rate of 16% from 2011 to 2016.
* Cosme has a product portfolio in growth segments, such as Dermatology and Gynaecology.
Cosme and its products have been present in the Indian market for over 40 years, creating equity
in the brands.
* Extensive sales and distribution capability across India, with access to circa 150,000 physicians,
providing a strong platform for new product launches and eventual exposure to Adcock Ingram
brands.
* The Indian Government has recently proposed a policy to increase the availability of free generic
medicine to its people, which if implemented could change the lives of hundreds of millions, and
further improve the environment for generic companies operating in India.
Adcock Ingram is committed to the Indian market and will continue to invest into its sales,
distribution, manufacturing and development capabilities to provide a world-class infrastructure and
products. This will allow Adcock Ingram to build on the heritage created by the Menezes family and
continue to provide quality and affordable medicines to the people of India.
4. Categorisation of Transaction
In terms of the JSE Listings Requirements, the Transaction is categorised as a Category 2 transaction.
5. Details of the Transaction
Adcock Ingram will acquire certain intangible assets, related to Cosmes domestic formulations,
export and institutional business, which will include but not be limited to: trademarks, pharmaceutical
dossiers, marketing know-how, customer relationships, supplier relationships, and manufacturing and
technical know-how. These intangible assets will be acquired from Cosme and two other group
companies, namely Cosme Remedies Limited and Cosme Pharmaceuticals Limited.
A limited number of movable tangible assets will be acquired under the agreement.
The purchase price is INR 4,800,000,000 (Indian Rupees Four Billion Eight Hundred Million) or
approximately ZAR 708 million. VAT of INR 240,000,000 (Indian Rupees Two Hundred and Forty
Million) or approximately ZAR 35 million, and stamp duty of INR 240,000,000 (Indian Rupees Two
Hundred and Forty Million) or approximately ZAR 35 million are payable on the purchase price. The
above amounts have been based on ZAR/INR exchange rate of 0.1474 as at Monday 9 July 2012.
(Source: Bloomberg).
The purchase price will be settled in cash with an initial upfront payment of 90% and the remaining
10% withheld for 6 months in an escrow account, as security for possible breaches of warranties.
The effective date of the Transaction shall be the 5th business day following the fulfilment or waiver of
all conditions precedent as contemplated in paragraph 6 below, which is anticipated to be no later
than 31 October 2012.
6. Conditions precedent
The Transaction is subject to the fulfilment or waiver, where applicable, of a limited number of
conditions precedent normal for a transaction of this nature, including all requisite regulatory
approvals in both India and South Africa such as, but not limited to, the South African Reserve Bank,
the Indian Foreign Investment Promotion Board and the Competition Commission of India.
7. Pro forma financial effects
The unaudited pro forma financial effects of the Transaction set out below have been prepared to
assist Adcock Ingram shareholders in assessing the impact of the Transaction on the Group`s historical
earnings per share ("EPS"), headline earnings per share ("HEPS"), net asset value ("NAV") per share
and net tangible asset value ("NTAV") per share. The pro forma financial effects are the responsibility
of the directors of Adcock Ingram and are provided for illustrative purposes only.
The pro forma financial effects have been prepared on the basis that the transaction had been fully
implemented on 1 October 2011 for purposes of the Statement of Comprehensive Income and as at
31 March 2012 for purposes of the Statement of Financial Position. It does not purport to be
indicative of what the consolidated financial results would have been had the Transaction been
implemented on a different date. The material assumptions are set out in the notes following the
table. Due to their nature, the pro forma financial effects may not fairly present the financial position,
changes in equity, results of operations or cash flows of Adcock Ingram after the Transaction.
Before the After the Percentage
Transaction(1) Transaction(2) change
EPS (cents) 198.4 197.5(3&4) -0.45%
HEPS (cents) 198.7 197.8(3&4) -0.45%
NAV per share (cents) 1,883.5 1,883.5(5) 0%
NTAV per share (cents) 1,457.1 1,014.5(5) -30.4%
Weighted average number of shares in issue 168,981,608 168,981,608(6) 0%
Notes:
1. Extracted from Adcock Ingram`s published and unaudited interim results for the 6-month period
ended 31 March 2012.
2. Based on the purchase price of the Transaction and Cosmes unaudited results for the 6-month
period ended 31 March 2012. Cosmes net profit before tax for the 6-month period is R 29.1m.
3. For the purposes of calculating the pro forma Statement of Comprehensive Income, Cosmes
unaudited Indian Rupee denominated results have been translated at an exchange rate of
0.1548, being the average exchange rate for the 6-month period ended 31 March 2012.
4. Pro forma EPS and HEPS include once-off transaction costs of approximately R5 million.
5. For the purposes of calculating the pro forma Statement of Financial Position, Cosmes unaudited
Indian Rupee denominated results have been translated at an exchange rate of 0.1484, being the
spot rate at 31 March 2012.
6. The weighted average number of shares in issue is based on the principle that the Transaction
was effective on 1 October 2011, as extracted from Adcock Ingram`s published and unaudited
interim results for the 6-month period ended 31 March 2012.
7. No charge for amortisation of intangible assets acquired pursuant to the Transaction has been
included in the pro forma financial effects. Any intangible assets acquired, that are determined to
have finite useful lives, will need to be amortised. Any amortisation charge that arises from these
intangible assets will have the effect of reducing the pro forma EPS and HEPS calculated above.
Based upon the fact that almost all assets being acquired are intangible by nature, any reduction
resulting from the amortisation charge could be material in relation to the figures disclosed
above.
8. The pro forma financial effects have been prepared using the same accounting policies as those
applied in the most recently published annual financial statements of Adcock Ingram.
Midrand
10 July 2012
Sponsor
Deutsche Securities (SA) Proprietary Limited
Date: 10/07/2012 04:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
