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Delayed Comesa approval holding Cipla buyout deal
Africa Capitalworks SSA is seeking approval to acquire a 51.18 percent stake in Cipla Quality Chemical. Photo / File
What you need to know:
- Completion of the Sh112b transaction between Cipla Group and Africa Capitalworks SSA has been extended for the third time in four months since it was first announced in March
A delay by the Common Market for Eastern and Southern Africa (Comesa) Competition Commission is holding back on the completion of a transaction in which Africa Capitalworks SSA is seeking to acquire majority shareholding in Cipla Quality Chemical, according to people familiar with the matter.
In a notice published early this week, Africa Capitalworks SSA indicated that it had agreed with Cipla Group to further extend the deadline for completion of the transaction pending receipt of all required consents.
This is the third time the deadline has been extended in a deal in which Cipla Group is expected to earn between Sh93.3b and Sh112b from the sale of its combined 51.18 percent stake in Cipla Quality Chemical held through Cipla (EU), and Meditab Holdings.
In March, Cipla and Africa Capitalworks SSA had indicated that they hoped to complete the transaction by May 31, but the deadline was later extended to June 31 with an automatic extension to July 31.
However, in an August 8 notice, Africa Capitalworks SSA indicated that conditions precedent had necessitated that the closure deadline is extended further by at least two weeks.
“On June 6 [Africa Capitalworks SSA] and Cipla issued a notice extending the date by which all conditions precedent must be fulfilled or waived for the transaction. We have now agreed to extend the date further, pending receipt of all required documents,” the notice reads in part, noting that the transaction is expected to be completed within 15 working days of fulfilment or waiver of conditions precedent.
The deal will see Cipla wholly exit drug manufacture Quality Chemical, which it acquired in 2015.
Monitor understand that Capital Markets Authority (CMA) approved the transaction in April, with Mr Keith Kalyegira, the CMA chief executive officer, indicating early this week that whereas they had already given the buyout a go ahead, there were some pending approvals that were outside CMA’s mandate.
Sources familiar with the matter told Monitor that the delay had resulted from the Comesa Competition Commission, which in a July notice had invited stakeholders, including competitors, suppliers and customers of the parties from within and beyond the region to give their opinions on the proposed acquisition of sole control by Africa Capitalworks SSA of Cipla Quality Chemical.
The delay could also have impacted investor and business activity with the drug manufacturer experiencing relatively low sales for the period ended March, in which annual revenue decreased by Shs45.9b to Shs221.4b while profits fell to Shs19b. However, the company proposed an increase in dividend payout from Shs2 per share to Shs2.5.
