Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) has made a $6 billion offer for India's Cipla Ltd. (BSE: 500087), according to sources quoted by the "Wall Street Journal's" Indian affiliate "LiveMint".
The source added, "Teva always prefers to buy a controlling stake in a targeted company, and will potentially buy the entire 36.8% promoter stake in Cipla, in addition to making the mandatory open offer to pick up another 20% stake from the public, at a premium of at least 20% on the existing market value."
Cipla denied the report, saying, "Cipla has no plans to sell the company, so hasn’t considered any of the proposals."
Teva told "Globes", "The company does not respond to market rumors."
LiveMint notes that, since 2012, Teva has made two previous approaches to Cipla, but was rebuffed.
Cipla has a market cap of $5.1 billion. The Mumbai-based company was founded in 1935, and has 26,000 employees. It produces generic drugs and active pharmaceutical ingredients (APIs), two of Teva's core businesses. Both companies produce respiratory, women's health, and oncology products. Cipla is also active in AIDS drugs, children's health, and malaria. It posted a profit of $251 million on $1.3 billion revenue in 2013.
"LiveMint" says, "The price is high because Teva considers Cipla an ideal fit. Teva’s senior management had picked Cipla as the best option for a strategic acquisition several times in the past, said the consultant cited above." It quotes a source as saying, "The Indian company’s large manufacturing base in India, the world’s cheapest location for generic drug manufacturing, and its strong market presence in emerging markets, including India, offer the best synergy for Teva." He added that Cipla’s strong presence in the global market for respiratory drugs is also a key attraction for Teva. Its 2015 revenue target includes a potential contribution of $2.4 billion from this segment alone, which makes it imperative that Teva explore the option of acquisition, targeting companies such as Cipla.
A second sources said, “Cipla may accept the offer as it faces growth challenges and succession issues."
Teva has made no big acquisition since Shlomo Yanai was CEO. During his term, the company made several large acquisitions, including Germany's Ratiopharm, and US brand drug maker Cephalon. Yanai's successor, Dr. Jeremy Levin, preferred to focus on small acquisitions and drew a cost-cutting plan to save $2 billion a year. However, Teva's new CEO Erez Vigodman recently refused to rule out future major acquisitions.
Published by Globes [online], Israel business news - www.globes-online.com - on May 8, 2014
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