Family dispute threatens Cipla sale for $7 billion

by MMC
0 comment

Differences within the Hamied family, the promoters of Cipla Ltd, over the transaction price and patriarch Yusuf K. Hamied’s decision to sell the drugmaker threaten to derail the $7 billion sale plan, according to five people familiar with the discussions.

Any sale could take longer than expected because a consensus has not yet emerged within the Hamied family, the sources said on condition of anonymity. Some family members questioned the offer price, approximately 1,200 per share and the family’s decision to exit the eight-decade-old company.

“No agreement on prices by a faction of the Hamied family has slowed down the transaction process,” one of the sources said.

“The third generation of the Cipla promoter group family does not want to exit at this stage unless a substantial bonus is offered to their shareholders,” the second person said.

According to the first person, Sophie Ahmed (Yusuf Hamied’s sister) and Samina Hamied (the daughter of Yusuf’s younger brother MK Hamied), who together own 7.93% of Cipla, are not in favor of the deal.

Samina Hamied declined to comment on the subject. Emails sent to members of the Hamied family went unanswered.

According to several reports, Gujarat-based Torrent Pharmaceuticals Ltd has expressed interest in purchasing the promoter’s stake and buying out Cipla, valuing the company at over 1,000 billion.

Kotak investment bank Mahindra Bank Ltd has been mandated by a faction of the Hamied family to select a suitable buyer.

Sophie, Samina, Rumana Hamied and Shirin Hamied (the wife of MP Hamied who holds 0.79%) are more in favor of maintaining control of the developer rather than selling at a high price. 1,200 per share, which is 3.5% above Monday’s closing price and a premium of 12.5% ​​over Cipla’s six-month average price.

Despite his substantial 18.68% stake in Cipla, Yusuf Hamied, after whom the University of Cambridge named a building after him in May, cannot unilaterally decide to cede control of Cipla.

A 2017 family pact, approved by the Securities and Exchange Board of India (Sebi), grants a right of first refusal to all family members of promoter Cipla, stipulating that any member of the Hamied family wishing to divest their shares must first propose them to other members of the family of the promoter group before submitting them to an external third party. Sophie Ahmed, who holds 5.71%, and Samina, the current vice-president of Cipla, who holds 2.22%, are parties to this pact.

“Since 2013-2014, some of the key members of the Hamied family were under the impression that Samina and her siblings would become the next promoters and executives to control Cipla in the absence of Yusuf or his brother MP Hamied. So the plan to sell control has hit them on the wrong foot,” the third person said.

MK Hamied, who owns 3.46% of Cipla, has no objection to the proposed sale of Yusuf’s shares and has always respected his elder brother’s business decisions.

In 2018, Yusuf’s wife Farida Hamied transferred her 5.22% promoter shares to her husband. And, according to some people Mint spoke with, Sophie, Samina and her siblings (Rumana and Kamil Hamied) cite this share transfer as a testament to the unity of the Hamied family, advocating that Yusuf Hamied pass on control of Cipla to the next generation rather than selling it to a foreigner.

“Because of Samina, her sister (Rumana) and mother, Shirin Hamied, are also not in a position to favor the decision to sell Yusuf’s shares,” the person said.

In fact, according to regulatory disclosures, there are multiple entities through which Shirin, Samina and the third generation of the Hamied family together hold stakes in Cipla as a promoter group (i.e. under one PAN) .

“Thanks to these combined promoter groups involving Samina and Sophie, resistance against the proposed sale of promoter shares has become very strong, which could be enough to either delay any takeover or block the deal,” he said. another person said.

The Hamied brothers have a philanthropic vision and wish to perpetuate the Hamied family’s contribution to health in emerging economies. The Hamied brothers are in their eighties and would like to see the future of their inheritance: the family heritage and the pharmaceutical company in good hands. That may be why Yusuf Hamied, who repeatedly vowed never to sell Cipla during his lifetime, is now considering selling the company, said a fourth person with knowledge of the matter.

A branch of the Hamied family believes that Cipla has seen phenomenal growth since Samina became vice-president of the company in September 2016.

Since September 2016, Cipla’s market value has doubled from 47,000 crore and its revenues soared by almost 70%, reaching 22,473 crore in 2022-23. Samina and Cipla Managing Director Umang Vohra have played a pivotal role in the company’s growth, expanding its presence not only in India but also in developed Western markets where it competes with Dr. Reddy’s Laboratories Ltd. and Sun Pharmaceutical Industries Ltd.

However, given Yusuf’s global reputation, people Mint spoke to said the Hamied family’s splinter faction may ultimately accept any developer sale decision made by the octogenarian patriarch.

“Cipla hopes to transform itself into a global healthcare organization with a focus on strengthening its presence in the US market,” Vohra said in an interview with CNBC-TV18 on August 22 last year, indicating a shift in Cipla’s traditional focus towards markets such as Africa, India and other developing South Asian countries, which were revolutionized in the early 2000s by affordable medicines and lifesaving drugs against HIV/AIDS from its visionary promoter Yusuf and other similar drugs against cancer and asthma from the house of Cipla.

Vohra had said that Cipla sees China, Brazil, South Africa and Australia as key markets, while planning to double its business in the US in five years through innovation and R&D on the US market, which could take Cipla into new areas such as biosimilars, mRNA technology and more.

“Exciting news! Mint is now on WhatsApp channels ???? Subscribe today by clicking the link and stay informed with the latest financial information!” Click here!

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign