Torrent Pharmaceuticals to Rope in CVC Capital to Aid in Cipla Acquisition
According to people familiar with the matter, Torrent Pharmaceuticals Ltd is in advanced talks with CVC Capital Partners to form a consortium and raise at least $1.2-$1.5 billion from the European buyout fund as the Ahmedabad-based pharma-power conglomerate puts together a Rs 60,000 crore ($7 billion) acquisition financing package, one of the largest in recent times, to acquire rival Cipla.
On September 1, ET reported Torrent's approach to PE funds, including Bain Capital, to form a larger consortium. According to the people cited above, Torrent is still in talks with Bain about becoming a possible co-investor, but is more likely to choose CVC as its lead partner.
Torrent is also engaged with Brookfield to raise $1-1.2 billion (Rs 8,300-9,000 crore) mezzanine debt as share-backed promoter financing. Torrent’s founders, the Sudhir and Samir Mehta family, own 71.25% as promoters. That’s among the highest promoter ownership in Indian pharma and they are seeking to use that headroom to dilute equity to raise leverage. Their plan is to create a non-disposable undertaking (NDU) using the shares as collateral for loans. An NDU is different from pledging of shares. Under an NDU, an entity can sell the stocks unlike pledging, which prevents the sale of shares.
The amount of funds has not yet been determined because Torrent has cast a wide net in order to organise funds, with the goal of concluding this by the end of September before proceeding with an offer. According to the people mentioned above, CVC and Brookfield can increase their commitments to as much as $2.25 billion (Rs 18,675 crore) and $1.5 billion (Rs 12,450 crore), respectively, if Torrent's talks with other capital pools, including domestic shadow banks and mutual funds, fail.