Cipla Limited is in preliminary discussions and have made an indicative proposal of acquiring approximately a 51% stake in Cipla Medpro South Africa Limited for a total consideration of $220 Mn.

The acquisition will help Cipla to integrate the marketing arm in South Africa with its manufacturing, regulatory and research units.

Johannesburg listed Cipla Medpro is a distributor Cipla Ltd.’s products in South Africa and in some neighboring countries.

Cipla Limited currently does not hold any stake in Cipla Medpro. Medpro used to source 80% of its products from Cipla, and the companies agreed Medpro would use the brand name of Cipla for selling products in Africa.

Last year, Cipla planned to invest for equity stake in Cipla Medpro’s manufacturing subsidiary. But the deal did not take off.

Cipla Medpro was founded by former CEO Jerome Smith in 1993. The company has a $220 Mn turnover with manufacturing facility in Durban and about 400 employees. It has 20-year supply pact with Cipla India that enables it to import generic drugs from India and sell them in South Africa.

Rival pharmaceutical company Adcock Ingram had made a bid for Cipla Medpro in 2009. The deal fell apart because Cipla India had threatened to terminate its supply agreement with Cipla Medpro if there was a change in its management.

Last month, Jerome Smith resigned after Cipla Medpro’s board suspended him and charged him with a string of alleged financial irregularities.

In 2010, Cipla India acquired Meditab Specialities Private Limited, a formulation manufacturing company for Rs. 133 Cr, while in the same year it sold its i-pill brand to Piramal Healthcare for Rs.95 Cr.

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