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South African regulator to probe Cipla’s exclusivity pact

By Fakir Hassen, IANS,

Johannesburg : The Johannesburg Securities Exchange (JSE) will investigate whether the termination of a 20-year supply pipeline to Cipla Medpro South Africa by Mumbai-based pharma major Cipla India was previously disclosed to the market.

This comes in the wake of the decision by South African pharmaceutical company Adcock Ingram to drop its plans to acquire Cipla Medpro, largely based on the threat by Cipla India to terminate the 20-year exclusivity agreement if there was a change in its management.

Adcock had announced the takeover bid in April, but decided Tuesday to withdraw citing Cipla Medpro’s reasoning that its principal supplier, Cipla India, was opposed to the deal.

“While we are disappointed to withdraw from a transaction which had such a compelling commercial rationale, we have been placed in an untenable position,” Adcock chief executive Jonathan Louw said.

The company attributed its decision to “the lack of response from the CMSA board, the uncertainty over the precise nature of the contractual relationship between Cipla India and CMSA, and the potential risk of retributive action by Cipla India.”

Adcock also said it was not aware whether the “alleged termination right” was previously disclosed to the market.

“The JSE is now investigating this matter,” the company said in a statement, adding: “To Adcock’s knowledge, the terms of the Cipla India agreement have never been publicly disclosed by CMSA (Cipla Medpro), except for a summary of salient terms contained in a limited information memorandum dated October 2005.”

Adcock said it recognised Cipla Medpro’s relationship with the Indian firm, and that it had consistently maintained it would seek Cipla India’s formal support at the appropriate time.

Cipla India’s joint managing director Amar Lulla had stated publicly in April that his company was not supportive of Adcock’s proposed offer.