Last Updated: August 23, 2023, 10:01 IST
Torrent Pharma has entered into the race to acquire the Hamied family’s stake in Cipla, people aware of the matter told News18.com. Ahmedabad-headquartered Torrent wants to take control of the fourth-ranked pharmaceutical major that is more than double (2.3x) its FY23 consolidated revenue, 2.3 times its profit, and 1.46 times its present market value.
However, the competition for buying out the Hamied family’s stake in Cipla also includes Blackstone, the largest buyout fund, and Baring PE Asia-EQT. Torrent Pharma, with advisory support from JP Morgan, is exploring options of forming a consortium with private equity funds. Preliminary discussions in this regard have already taken place with a few potential partners, the Economic Times reported.
If the Torrent deal comes to fruition, it would eventually lead to the creation of India’s second-biggest pharmaceutical company after Sun Pharma by revenue.
Torrent has talked to multiple lenders for funding and is willing to make an all-cash offer. Work has gained momentum in the past month, the financial daily said, citing sources.
A successful transaction is likely to place Torrent Pharma ahead of Sun Pharma in the domestic formulation business.
The family owns 33.47 per cent and may become minority owners if the talks succeed, said a source close to the development. The current market value of Cipla is Rs 98,562.79 crore, up 16.5 per cent in the past month ever since the news of a potential sale became public. At this price, the promoter stake alone is valued at Rs 32,988.9 crore ($3.97 billion).
Considering the open offer for 26 per cent that has to be held under the takeover rules is fully subscribed, a new owner may end up paying a total Rs 58,615.2 crore ($7.06 billion) for a 59.47 percent stake, the financial daily said.
The Sudhir and Samir Mehta family, who are the owners of Torrent, possess a substantial 71.25-percent stake in the company, and this significant ownership gives them the flexibility to dilute their equity to raise leverage. “At the current market cap, the company can raise around Rs 26,000 crore and yet the promoters would continue to hold around 51 per cent shareholding,” a person familiar with the matter told the publication.