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Johannesburg - Pharmaceutical group Cipla Medpro rejected the acquisition advances of competitor Adcock Ingram because it is strong enough to grow by itself, said an analyst.
Adcock Ingram is losing market share to the likes of Cipla and even its employees are being poached, according to Gavin Woods, chief investment officer of Kagiso Investments.
Adcock approached Cipla in April with an offer of R4.75 per share.
Cipla rejected the offer, citing its supplier Cipla India's disapproval. Cipla has a long-standing agreement with Cipla India to distribute its products in South Africa.
On Tuesday, Adcock scrapped its R2.1bn offer. Cipla CEO Jerome Smith refused to comment on why the deal was canned.
"This is a disappointment as Adcock would have benefited from the fact that Cipla has been achieving strong volume and revenue growth within South Africa, and has access to an attractive drug pipeline from Cipla India," said Mark Wadley, a healthcare analyst at Credit Suisse Standard Securities.
"It should also be disappointing for Cipla shareholders because the termination clause that Cipla India claims is in their supply contract, could prevent other offers for Cipla."
Woods said Cipla's fortunes are on the rise. "It has amongst the fastest growing markets in the industry and the best pipeline for distribution," he said.
According to Adcock CEO Jonathan Louw, the decision to retract its offer was in shareholders' interest.
"Although it's very disappointing, the decision was made according to strong strategic rationale, and we believe we have the ability to consummate more acquisitions."
Dr. Peter Breitenbach from the market intelligence firm Frost & Sullivan, said the failed deal stood in contrast to the recently concluded transaction between Adcock competitor Aspen and international pharmaceutical group Glaxo SmithKline.
"While the deal made sense on paper, the whole transaction was becoming very polarised and that is never going to work if the two parties can?t work together."
- Fin24.com
