Torrent Pharmaceuticals Secures $5 Bn Funds for Cipla Deal

Reportedly, Torrent has secured commitments from a consortium of international banks to support this acquisition. Further, the pharma company is interested in purchasing either the entire or a portion of the 33% stake in Cipla currently owned by the family shareholder group.

Indian pharmaceutical major, Torrent Pharmaceuticals has lined up at least $5 billion in funding to take over its rival Cipla Ltd.

Reportedly, Torrent has secured commitments from a consortium of international banks to support this acquisition. Further, the pharma company is interested in purchasing either the entire or a portion of the 33% stake in Cipla currently owned by the family shareholder group.

In response to the ongoing valuation buzz, Torrent has made its stance clear, insisting on a valuation below $11 billion, even though it has the necessary funding readily available.

This stands in contrast to the founding family of Cipla, who are aiming for a valuation of approximately $13 billion for the company. This difference in views on the company's valuation is causing delays in finalising the deal.

Additionally, Cipla family members could sell some or all of their stakes in the company. Such a move would trigger an open offer for an additional 26% of the company, potentially resulting in a new owner holding as much as 59.4% of Cipla. This development could surpass Sun Pharma's $4 billion acquisition of Ranbaxy from Daichii in 2014.

Moreover, Cipla had been in discussion with an advisor and four to five large PE funds, most of whom are seeking a complete buyout of the promoter stake. However, the high valuation demanded by the founding family has led to reluctance among potential buyers, adding to the situation's complexity.

Sharing a quick recap of the entire story, the Ahmedabad-based Torrent Pharma was engaged in talks with investment firms including Luxembourg's CVC Capital Partners, Brookfield, Apollo Global Management and Bain Capital, to raise funding to acquire Mumbai-based Cipla.

Later, Cipla, the country's third-largest drugmaker, came to the field to sell its 60% stake. Discussions were held with Torrent Pharmaceuticals as well as a group of buyout firms led by BPEA EQT and General Atlantic.

Initially, Bernstein analysts had estimated the deal to be valued at around the $7 billion mark, however, the demand by the Cipla family to raise the bar to $13 billion has sparked disagreements among the promoters.

The uncertainty persists regarding whether the final deal will indeed be settled at $13 billion or if Cipla will accede to lowering its demand in alignment with Torrent's preference.

Founded by U. N. Mehta in 1959, Torrent Pharmaceuticals Ltd. is an Indian pharmaceutical company headquartered in Ahmedabad. It aims to provide affordable and quality medicines to people across the globe. Currently, the company has a presence in over 50 countries worldwide.

While, Cipla Ltd. is another Indian multinational pharmaceutical company founded in 1935 by Dr. Khwaja Abdul Hamied. The Mumbai-based pharma has a presence in over 80 countries worldwide. Cipla’s aim is to make healthcare accessible and affordable to all.

In another significant development, Cipla joined hands with Skye Air Mobility to offer drone-powered medicine delivery in Himachal Pradesh. With this initiative, the companies sought to ensure the timely delivery of medicines to chemists and clinics in remote areas while mitigating the risk of compromising cold chain products due to temperature fluctuations.

Shares of Cipla were down 0.44% at 11:00 a.m. on the NSE at INR 1,194.90 a share.