Cipla Medpro's (CMP) suspended CEO‚ Jerome Smith‚ has resigned on the eve of a disciplinary hearing against him‚ a move that analysts say may pave the way for a takeover of the local pharmaceutical company‚ Business Day reported on Monday, 8 October 2012.
Smith confirmed his resignation on Sunday‚ saying a prolonged conflict with the board would not be in his or shareholders' interests.
"A series of events has demonstrated unequivocally that the current board of Cipla Medpro - which I was required by my contract to serve - have rendered the continuation of a meaningful and trusting relationship an impossibility‚ and for me to attempt to continue to serve shareholders under these circumstances presents an intolerable state of affairs‚" he said.
Describing the board as "malicious"‚ Smith said he was not prepared to waste money defending himself at a disciplinary hearing that had been scheduled for Monday. He declined to specify the charges laid against him by Cipla Medpro‚ or discuss what lay behind his conflict with the board‚ saying he was planning legal action. "Legal proceedings (will) be brought by me in due course in which the relevant facts and circumstances may be revealed‚" Smith said.
Cipla Medpro chairman S'bu Luthuli declined to be interviewed but confirmed Smith's resignation on Friday afternoon. He said the company would issue a Stock Exchange News Service statement on Monday.
Cipla Medpro's board has remained tight-lipped about its reasons for Smith's suspension on August 15. Their action saw the share price placed under pressure and scotched talks with an undisclosed party‚ which industry sources believe to have been the Indian Cipla.
The company is being investigated by the Takeover Regulation Panel for the way it handled the potential deal‚ following a complaint from Smith on behalf of shareholders.
Cipla Medpro was founded by Smith 10 years ago‚ and is the third-biggest pharmaceutical company listed on the JSE after Aspen Pharmacare and Adcock Ingram. It was the target of a takeover bid from Adcock Ingram in 2009‚ and more recently industry sources say talks were under way with Mumbai-based Cipla‚ one of India's biggest generic manufacturers.
"Cipla has always been a take-over target‚ as it has a very valuable portfolio of registered (medicines).... Although it has grown its top line by about 21% in the past five years‚ its expenses have grown far faster‚ so there is huge synergy in a possible takeover‚" said Chris Logan of Opportune Investments.
Cipla Medpro's senior managers have previously expressed their support for Smith‚ adding to the general sense of confusion over what his alleged transgressions might be.