Family rift clouds $7 bn sale of Cipla

Differences within the Hamied family, Cipla Ltd’s promoters, over the pricing of the deal and the decision of patriarch Yusuf K. Hamied to sell the drugmaker threaten to derail the $7 billion sale plan, according to five people aware of the discussions.

Any sale may take longer than anticipated since a consensus is yet to emerge within the Hamied family, the people said on condition of anonymity. Some family members have questioned the deal’s pricing of around ₹1,200 per share and the family’s decision to exit the eight-decade-old business.

“A non-agreement on pricing from a faction of the Hamied family has put the deal process on the slow track,” said one of the people.

“The third-generation of the Cipla promoter group family is not keen to exit at this stage unless a substantial premium is offered to their shareholding,” said the second person.

According to the first person, Sophie Ahmed (Yusuf Hamied’s sister) and Samina Hamied (Yusuf’s younger brother M.K. Hamied’s daughter), who together own 7.93% of Cipla, are not in favour of the deal.

Samina Hamied declined to comment on the matter. Emails sent to Hamied family members remained unanswered.

According to several news reports, Gujarat-based Torrent Pharmaceuticals Ltd has evinced interest in buying the promoter stake and taking over Cipla, valuing the company at over ₹1 trillion.

Kotak Mahindra Bank Ltd’s investment banking arm has been mandated by a faction of the Hamied family to shortlist an appropriate acquirer.

Sophie, Samina, Rumana Hamied and Shirin Hamied (M.K. Hamied’s wife who holds 0.79%) are more in favour of retaining promoter control rather than selling at ₹1,200 per share, which is 3.5% above Monday’s closing price and 12.5% premium to Cipla’s six-month average price.

Despite his substantial 18.68% promoter stake in Cipla, Yusuf Hamied, after whom Cambridge University named a building in May, cannot unilaterally decide to divest control of Cipla.

A 2017 family pact, approved by the Securities and Exchange Board of India (Sebi), grants the right of first refusal to all Cipla promoter family members, stipulating that any Hamied family member seeking to divest their shares must first offer them to other members of the promoter group family before submitting them to any outside party. Sophie Ahmed, who owns 5.71% and Samina, the current vice-chairman of Cipla, who holds 2.22%, are a party to this pact.

“Some of the key Hamied family members were under the impression since 2013-14 that Samina and her siblings would be made the next promoter-cum-leaders to control Cipla in the absence of Yusuf or his brother M.K. Hamied. So, the plan to sell control has caught them on the wrong foot,” the third person said.

M.K. Hamied, who owns 3.46% of Cipla, doesn’t have any objection to Yusuf’s stake sale plan and has always abided by his elder brother’s business decisions.

In 2018, Yusuf’s wife, Farida Hamied, transferred her 5.22% promoter shares to her husband. And, according to some of the people Mint spoke to, Sophie, Samina and her siblings (Rumana and Kamil Hamied) cite this share transfer as a testament to the Hamied family’s unity, advocating Yusuf Hamied pass control of Cipla to the next generation rather than selling it to an outsider.

“Because of Samina, her sister (Rumana) and mother, Shirin Hamied, too, are not able to favour Yusuf’s stake sale decision,” the person said.

In fact, according to regulatory disclosures, there are several entities through which Shirin, Samina and the third generation of the Hamied family together hold Cipla stake as one promoter group (meaning under a single PAN).

“Through such combined promoter groups involving Samina and Sophie, the resistance against the proposed promoter stake sale plan has become really strong, which may be enough to either delay any takeover or stall the deal,” said another person.

Hamied brothers have a philanthropic outlook and would like to perpetuate the Hamied family’s contribution to healthcare in emerging economies. The Hamied brothers are octogenarians and would like to see the future of their legacy—the family wealth and the pharma company in safe hands. Perhaps this is the reason why Yusuf Hamied, who vowed on many occasions never to sell Cipla in his lifetime, is now harbouring the thought of selling the business, a fourth person aware of the matter said.

A branch of the Hamied family believes that Cipla has staged phenomenal growth after Samina came in as the company’s vice-chairperson in September 2016.

Since September 2016, Cipla’s market value has doubled from ₹47,000 crore and its revenue has climbed nearly 70%, reaching ₹22,473 crore in 2022-23. Samina and Cipla’s chief executive, Umang Vohra, have played pivotal roles in the company’s growth, expanding its presence not only in India but also in developed Western markets where it competes with Dr. Reddy’s Laboratories Ltd and Sun Pharmaceutical Industries Ltd.

However, given Yusuf’s global reputation, the people Mint spoke to said the dissenting faction of the Hamied family may ultimately agree to any promoter sell-off decision taken by the octogenarian patriarch.

“Cipla hopes to transform itself into a global healthcare organization with a sharp focus on strengthening its presence in the US market,” Vohra said in an interview with CNBC-TV18 on 22 August last year, indicating a shift in Cipla’s traditional focus on markets such as Africa, India and other developing south Asian countries, which were revolutionized in early 2000s by its visionary promoter Yusuf’s affordable life-saving HIV/AIDS drugs and other such medicines for cancer and asthma from the house of Cipla.

Vohra had said Cipla was looking at China, Brazil, South Africa and Australia as key markets while looking at doubling US business in five years through innovation and R&D in the US market that could take Cipla to new areas like biosimilars, mRNA technology and more.