Cipla (NSE: CIPLA) shares have been doing well recently. The business itself has been doing well but there’s also that swirling rumour of a Blackstone takeover bid that’s about to appear. The business results now seem to be embedded in the price, it’s changes in the likelihood and price of the bid that additionally drive it.
As we said about the results at Cipla: “Cipla (NSE: CIPLA) shares are up around 10% today on the back of their announced results. Which is an interesting change - far too much of today's market price movement is about what might happen, or what people think could happen and so on. Speculation in short. So it's a refreshing change to see a share price moving on what the business has actually managed to do, has been able to achieve. But that is what seems to be happening here.” A 45% rise in net profits was indeed to be celebrated.
But of course it was only weeks later that the Cipla shares started to move for another reasons, more speculative: “Cipla (NSE: CIPLA) shares are up 4% today on the back of reports that Blackstone is about to buy into the company. But the interesting issue is who has been talking? For Blackstone most certainly wouldn’t want to drive the Cipla share price up against its own bid. Those potentially selling would have an obvious interest in letting the news out - that could increase the price offered nicely. Or perhaps just reduce the downward pressure on what the offer might turn out to be. Then of course there’s just that issue of if people know about it then perhaps they might like to try trading upon what they know.”
Cipla share price from Google Finance
The story today is: “Today, Blackstone, the world’s largest private equity group, is looking for the entire promoters’ stake of 33.47 per cent owned by the Hamied family. So are Indian rivals Torrent Pharmaceuticals and Dr. Reddy’s Laboratories.” Torrent is looking to tie up with Apollo: “India's Torrent Pharmaceutical (TORP.NS) is in preliminary talks with Apollo Global Management (APO.N) to secure a loan of up to $1 billion to help fund a planned bid for Cipla (CIPL.NS), two people briefed on the discussions said. Torrent is hoping to secure roughly $3 billion to $4 billion in financing for the bid for its much bigger rival, they said.”
And thus the move up in Cipla shares, that bid battle seems to be heating up.
Just one further comment here from us, on that press leak a couple of months back. Sure, that was to boost the starting price for the negotiations. Hey, it worked for Lithium Power’s negotiations with Codelco. But we do think private equity is going to be more difficult to fool this way than a government owned company is.
