Promoters of Cipla Ltd, one of India’s leading pharmaceutical companies, are reportedly in advanced talks with two consortiums for the sale of a controlling stake valued at approximately $6-7 billion. The potential buyers include a consortium led by Torrent Pharmaceuticals Ltd, backed by prominent family offices and investments from entities associated with Sun Pharmaceutical Industries Ltd and Zydus Lifesciences Ltd. Another group of buyout firms, including BPEA, EQT, and General Atlantic, leads the second consortium.
A successful bid by Torrent Pharma would position it as the second-largest Indian drugmaker after Sun Pharma. Cipla’s promoter group, led by founder Yusuf K. Hamied, is seeking a valuation of at least ₹33,000 crore (approximately $4.5 billion) for its 33.47% stake and will only consider ceding control if binding bids value the drugmaker at ₹1 trillion (approximately $13.5 billion).
The discussions regarding valuations and premiums took place recently, with Cipla’s promoters seeking a price slightly over ₹1,200 per share. Cipla’s shares closed trading at ₹1,180.50 on Wednesday, valuing the company at ₹95,300 crore (approximately $12.8 billion).
In the event of a change in promoter control, a mandatory open offer would be triggered, requiring the buyer to acquire up to 26% from Cipla’s shareholders. The total amount required for the acquisition could be at least ₹51,000 crore (approximately $6.9 billion). However, if the acquirer offers a premium to the market price, more than 26% of public shareholders may tender their shares, potentially increasing the deal’s size to $7 billion or more.
While most of the promoter stake would be acquired by Torrent Pharma’s promoters, private equity (PE) firms such as Bain Capital and Apollo Global would provide financing to Torrent Pharma’s promoters for funding the mandatory open offer. This multi-billion-dollar deal aims to ensure the financial support required for a smooth transition in promoter control.
One or two members of Cipla’s promoter family may retain around 5% of the company as non-promoter shareholders even after the proposed promoter exit. This sale is driven by the lack of clear successors within the Hamied family to lead Cipla, as indicated by investment bankers.
Kotak Mahindra Capital is advising as the banker for Cipla’s promoters, while JPMorgan is representing Torrent Pharma’s promoters in this deal. Several other private equity firms may join the consortium led by BPEA EQT and General Atlantic to meet the acquisition’s funding requirements.
This potential takeover of Cipla is a significant development in the pharmaceutical industry, given the company’s rich legacy and its contributions to providing affordable generic drugs for various diseases and ailments. The fate of this deal will continue to be closely watched by stakeholders in the pharmaceutical and investment communities.
