SA could score 40% of Adcock, CFR deal

The deal between CFR Pharmaceuticals and Adcock Ingram is for the acquisition of 100% of Adcock's share capital.

The transaction, if implemented, would create a merged company with combined revenues of approximately R12.1-billion, of which South Africa could expect to generate 40%. CFR also said it would seek a secondary listing on the JSE. 

Chairperson of Adcock Ingram's independent board Dr Khotso Mokhele said: "Should these discussions eventuate in a transaction, it would represent a significant foreign direct investment into South Africa, enhancing South Africa's reputation and profile as an attractive investment destination. The combined company would optimise manufacturing efficiencies by shifting production of certain products to South Africa, resulting in additional investment in manufacturing – ultimately with a positive effect on long-term employment and exports."

According to Adcock Ingram's statement, CFR, founded in 1992, has expended into other Latin American countries and emerging markets. It has operations in North America and Europe through its Canadian subsidiary, Uman Pharma, and its UK-based subsidiary, Allergy Therapeutics. CFR also has a presence in South East Asia through a manufacturing hub and a commercial affiliate in Vietnam.

The potential offer price of R73.51 per Adcock ordinary share would be settled in cash and new CFR ordinary shares. CFR would also make comparable offers to Adcock Ingram's broad based black economic empowerment partners and participants in its employee incentive schemes.

No plans retrenching
Adcock Ingram has a portfolio that includes anti-retrovirals, over-the-counter diabetes, dermatology and ophthalmology medicines that has a market in Latin America. CFR would also gain access to Adcock's markets in sub-Saharan Africa. 

CFR said that Adcock Ingram brands will be preserved, should the deal go through, but they would combine sourcing and procurement of active pharmaceutical ingredients, and take advantage of each other's intellectual property and new therapeutic areas.

The statement said Adcock Ingram's current manufacturing facilities would play a key role in the combined group which would shift production of certain products to South Africa and India. 

CFR has also indicated that it has no plans for retrenchments in the event of a transaction; if anything, the expectation is that the impact of the combination on employment will be positive. In addition, CFR has committed to ensuring that Adcock Ingram remains appropriately empowered.

Commenting on the potential offer, Mokhele said: "Adcock Ingram's independent board believes there is a compelling rationale for a combination of CFR and Adcock Ingram. The companies have complementary product portfolios, business structures, geographical presence and manufacturing footprints, and the combination of the companies would deliver value not only to shareholders, but also to employees and South Africa at large."

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