India's Cipla puts $215 mln S.Africa bid on hold

Cipla, which has a supply agreement with the Cape Town-based company but has never owned a stake in it, in November offered to buy 51 percent of Cipla Medpro to gain a bigger foothold in Africa's growing market for low-cost drugs.

But just days after the offer, Cipla Medpro won a 1.4 billion rand ($158 million) contract from the South African government to supply HIV/AIDs drugs to local hospitals, sparking speculation the Indian firm would have to increase its bid.

Cipla Chairman YK Hamied told Reuters on Monday the company had put on hold talks to buy South Africa's third-largest seller of generic drugs, confirming an earlier media report.

Hamied did not give a reason for the stalled talks, but some analysts said it was likely over valuation.

"The initial valuation of about two times the sales of Cipla Medpro was quite reasonable, as Cipla was planning to expand its reach across Africa," Daljeet Kohli, head of research at Mumbai-based brokerage IndiaNivesh.

"Anything beyond this range of valuation was not justifiable as there was no value addition happening to the existing business. Maybe, that is why Cipla has decided to rethink."

Cipla had said it would offer 8.55 rand a share for Cipla Medpro. The target's shares, which had risen as high as 9.50 rand on speculation of a sweeter bid, were down as

... contd.