Cipla's Promoter Stake Sale In Limbo Due To High Valuation Target: Report

The founding family is seeking about Rs 1,350 per share, representing a 10 per cent premium over the current price
Cipla's Promoter Stake Sale In Limbo Due To High Valuation Target: Report

The sale of a stake in Cipla Ltd. is in a limbo as potential buyers are unwilling to accept the Rs 1.09 lakh crore ($13.1 billion) valuation that members of the founding family are targeting for the Indian company in a deal.

Negotiations to sell the company between the family members and prospective buyers, including companies in the industry and private equity firms, have broken down as the founders are demanding Rs 1,350 per share, sources close to the matter told Bloomberg. The price represents a premium of 10 per cent over the Wednesday close.

About 33 per cent of Cipla's shares, worth close to $4 billion at Wednesday's closing price, are under the control of the family shareholder group or the promoter group. Since it became known that the Hamied family was most likely to sell a portion of their investment on July 27, Cipla shares have increased by roughly 16 per cent.

People close to the matter claimed that the family members may sell all or a portion of their respective holdings in Cipla. The business was established in 1935 by Non-Executive Chairman Yusuf K. Hamied's father in Mumbai, and at the turn of the millennium, it set the standard for the marketing of low-cost, generic HIV medications throughout Africa.

Sources stated that discussions are still ongoing and that no choice has been made regarding the agreement. The family members still have the option to reduce the asking price or decide against moving forward with the transaction, according to the sources. Cipla is yet to offer comments on the matter.

Earlier in February 2022, the promoter group including Dr Y K Hamied, Chairman and MK Hamied, Vice Chairman who are Non-Executive Directors, had sold a 2.5 percent stake in the company for “personal purposes including philanthropy”.

The sale reportedly brought in about Rs 1800 crore.

Cipla was able to increase its sales during the Covid-19 pandemic, as it acquired the right to produce and sell Gilead Sciences Inc.'s remdesivir. India was among the 127 nations where Cipla could sell the drug. According to the company's website, it operates in more than 80 countries and offers more than 1,500 items in a range of therapeutic categories.

According to the company website, Samina Hamied, executive vice-chairperson of Cipla, is a member of the founding family's third generation and a former employee of Goldman Sachs Group Inc. Her father MK Hamied serves as non-executive vice chairman. Her uncle is YK Hamied.

Several family-owned businesses in Asia are thinking about succession planning, depending on whether the following generation wants to assume the helm. The 66-year-old Mukesh Ambani, chairman of Reliance Industries Ltd., stated that he will use the next five years to train his children to transform India's most valuable corporation. Others are contemplating stake sales, giving private equity companies a wide range of prospective acquisition prospects.

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