* Cipla Ltd gives no reasons for putting deal on ice
* Cipla Medpro says has not received any word from suitor
* Cipla Medpro shares down 4 pct, still at premium to offer
(Adds analysts comments, updates shares)
By Tiisetso Motsoeneng and Kaustubh Kulkarni
JOHANNESBURG/MUMBAI Feb 11 (Reuters) - India's Cipla Ltd
has put on hold a $215 million bid for control of
South Africa's Cipla Medpro, signalling it may be
unwilling to sweeten its offer for the drug firm.
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 much as 7.4
percent after Hamied's comments and were 4.4 percent lower at
8.99 rand by 1404 GMT, still above the offer price.
Cipla Medpro said it had not received any official word from
its Indian affiliate about its decision to suspend talks.
"We have not received any communication from Cipla Ltd about
its withdrawal from the talks," Johan du Preez, Cipla Medpro's
acting CEO, told Reuters.
Cipla supplies the bulk of Cipla Medpro's drugs under an
agreement spearheaded by the South African firm's founder and
former CEO, Jerome Smith.
Smith quit last year following board accusations he had
taken loans and other financial assistance from his company
without proper approval. He is now taking legal action against
There has been speculation Smith's departure could affect
the relationship between the two companies. However, one fund
manager said the supply agreement would likely remain intact.
"Cipla might have decided that the valuation of Cipla Medpro
is now too high, but South Africa is still an attractive market
for them and it would make sense to keep the supply agreement
even if the deal collapses," Laurie Slatter, a fund manager at
36ONE Asset Management in Johannesburg.
The market for generic drugs - cut-price versions of drugs
that are no longer under patent protection - is growing in South
Africa as the government aims for a national health insurance
scheme heavily reliant on low-cost medicine.
($1 = 8.8833 South African rand)
(Editing by David Dolan and David Holmes)