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.

It said it had asked the Johannesburg Stock Exchange to investigate whether the Cipla India agreement contained a termination right.

CMSA said it would respond to Adcock's allegations in due course.

Adcock Ingram said headline earnings per share -- South Africa's main profit gauge which strips out certain financial and non-trading items -- rose 18 percent to 204.8 cents for the six months to end-March.

Turnover rose 23 percent to 1.897 billion rand boosted by growth from an anti-retroviral tender awarded in the second half of its previous financial year, Adcock said.

(Additional reporting by Serena Chaudhry; Editing by David Cowell)