Cipla seeks to exit Quality Chemical in Shs112b buyout

Cipla, an Indian pharmaceutical company, is expected to wholly exit Cipla Quality Chemical Industries Uganda in a transaction that is expected to cost between $25m (Shs93.3b) and $30m (Shs112b).

In a disclosure notice to shareholders filed through Bombay Stock Exchange, National Stock Exchange of India and Luxembourg Stock Exchange, Cipla indicated that it had on Monday (March 14) entered into an agreement with Africa Capitalworks SSA, in which it would dispose of its entire stake in Cipla Quality Chemical Industries Uganda held through Cipla (EU) , and Meditab Holdings.  

“…  the company [Cipla] and its wholly owned subsidiaries, Cipla (EU), UK and Meditab Holdings, Mauritius, have entered into a share purchase agreement with Africa Capitalworks SSA on [March 14] for sale of 51.18 [percent] stake held in Cipla Quality Chemical, Uganda. Subsequent to the sale, Cipla Quality Chemical will cease to be a subsidiary of [Cipla],” the notice reads in part. 

The proposed sale, which disclosure details indicate will cost between $25m (Shs93.3b) and $30m (Shs112b), is expected to be completed by May 31, 2023.

“Consideration to be received by Cipla (EU) and Meditab shall be in the range of $25m (Shs93.3b) - $30m (Shs112b),” the notice reads.  

Yesterday, in a notice to shareholders filed through the Uganda Securities Exchange and published in different newspapers, Cipla Quality Chemical indicated that Africa Capitalworks SSA had applied to Capital Markets Authority for approval of the transaction, which, if approved, will significantly impact the company’s shareholding. 

“This transaction, if approved, will lead to a change in the company’s shareholding structure. Shareholders and the public are hereby notified ..  and are advised to exercise caution when dealing in the shares of the company,” the notice reads.  

Mr Ajay Pal, the Cipla Quality Chemical chief executive officer, told Monitor yesterday that irrespective of which direction the transaction takes, there would be close to no changes given that Cipla is a profitable business with an expanding market, boosted by the manufacture of new drugs. 

“This is more of a special transaction not a takeover. We shall give more details once Capital Markets Authority and Uganda Securities Exchange approve the sale of shares,” he said.

The disclosure notice also indicated that as of March 31, 2022, Cipla Quality Chemical had a total net worth of $44.08m Shs164.6b), contributing at least 1.62 percent of Cipla Limited’s consolidated net worth while the company generated  $75.21m (Shs280.9b) in revenue, which contributed 2.57 percent of Cipla Limited’s consolidated revenue.

The transaction will see Capitalworks SSA, a South African-based equity fund, become Cipla Quality Chemical’s largest shareholder, increasing its stake from 11.51 percent to 62.91 percent. 

Africa Capitalworks SSA, is a wholly-owned subsidiary of Africa Capitalworks Holdings, Mauritius. 

Quality Chemical Industries Uganda, which was founded by Emmanuel Katongole, Ferderick Kitaka Mutebi and George Baguma, who still hold a 2.78 percent stake each in Cipla Quality Chemical, was acquired by Cipla, which is headquartered in India, in 2015. 

Cipla Quality Chemical manufactures a range of drugs, among them antiretroviral (ARVs) and antimalarial medicines, majority of which, are sold to government and sovereign customers. 

Shareholding 

Meditab, is currently Cipla Quality Chemical’s largest shareholding with a 51.05 percent stake. It is followed by Capitalworks SSA, at 11.15 percent and TLG Capital (Amistad) at 11.5 percent.  

Others are Government Employees Pension Fund (8.54 percent), NSSF (7.38 percent), Cipla EU (0.13 percent) and Joseph Yiga (0.11 percent). 18 percent is held by individual shareholders.

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