UPDATE 2-Adcock Ingram scraps $264 mln CMSA buy-out bid

* Has cash to make acqusitions in S.Africa, eyeing W.Africa

* Scraps deal after threat over supply agreement

* Adcock under pressure to compete with Aspen in Africa

* H1 headline EPS up 18 pct

(Recasts with CEO comments, shares, background)

By Tiisetso Motsoeneng

JOHANNESBURG, June 2 (Reuters) - South Africa's No.2 drug maker Adcock Ingram (AIPJ.J) scrapped its plan to buy rival Cipla Medpro SA (CMPJ.J) on Tuesday after CMSA's generic drug supplier threatened to cancel an important supply agreement.

Adcock Ingram said in April it planned to offer 2.1 billion rand ($263.8 million) for CMSA to boost its share of the generic medicine market and to compete more effectively with larger peer Aspen (APNJ.J).

But CMSA's drug supplier, Bombay-based Cipla Limited (CIPL.BO), rejected the proposed offer, saying it would not be in the best interest of its shareholders.

Shares in CMSA fell 3.36 percent to 3.45 rand by 0710 GMT, and Adcock was flat at 43.65 rand.

"The fact that there appeared to be some ... I'd call it almost openly hostile responses from the Indian partner with respect to the business in South Africa... has put us in an untenable position," Adcock CEO Jonathan Louw said in a phone interview.

Louw told Reuters the company was under no pressure to make acquisitions but said it had cash for purchases in South Africa.

Adcock, which recently established a sales office in Kenya, would look to increase its presence in west Africa, Louw said.

Analysts says Adcock, which was spun off from consumer goods firm Tiger Brands (TBSJ.J) in 2007, needs to compete more aggressively with Africa's biggest generic drug maker Aspen Pharmacare.

GlaxoSmithKline (GSK.L) agreed last month to take a 16 percent stake in Aspen via a transfer of assets in a deal that will give the South African firm more muscle globally, particularly in Africa.

Adcock, which sells painkillers such as Panado and Corenza-C, said CMSA had failed to give its views on the merits of the proposed transaction, despite its public undertakings to do so.