PIC still mulling Adcock’s $1.3bn CFR deal

South African based Adcock Ingram needs to diversify and to expand into new markets. (David Harrison)

South African based Adcock Ingram needs to diversify and to expand into new markets. (David Harrison)

Adcock's largest shareholder Public Investment Corporation (PIC) said it will not decide whether to support a $1.3-billion takeover proposal from Chilean drugmaker CFR Pharmaceuticals South Africa until November 4 at the earliest.

"The Public Investment Corporation has not made a decision yet, the transaction is still under consideration," PIC’s Chief Investment Officer Daniel Matjila said. "We’re doing our utmost best to have a position on Monday."

Adcock, South Africa’s largest supplier of hospital products, said yesterday shareholders representing about 45% of its shares had backed the cash and shares deal. As many as 75% of investors will have to vote in favor for the takeover to succeed, Khotso Mokhele, chairperson of Adcock's independent board, said September 11.
The PIC, which oversees the pension funds of South African government workers, has a 14% stake in Adcock.

"The PIC vote will be crucial," Wayne McCurrie, a portfolio manager at Momentum Asset Management in Johannesburg. "I don’t see why the deal won’t go through at this stage, I just think some shareholders will wait until the last minute to commit."

CFR, Chile’s largest drugmaker, said in July it would pay R12.6-billion in cash and shares for Adcock as it seeks to expand in other emerging markets. The company said last month it will settle as much as 51 percent to 64.3% of the purchase through cash and the balance with new CFR shares. The transaction works out at R73.51 per Adcock share, according to both companies.

Strategic partner
The PIC would be willing to consider a strategic partner or investor if a cash offer is for 50% plus one share control of Adcock, Matjila said on July 17.

In May Matjila said  the PIC would prefer a South African company to buy the maker of Panado painkillers and Corenza cold medicine.

CFR struck agreements with Adcock’s Swiss partner Baxter Healthcare SA regarding the licensing, distribution and supply of Adcock’s hospital products and with Adcock’s black empowerment partners in South Africa, according to yesterday’s statement.

"This is a high level of support given the fragmented nature of the company’s shareholder base," Adcock said in the statement on Wednesday. "Only a limited number of requested shareholder undertakings are still to be received."

CFR has faced competition from London-based private equity firm Actis and Bidvest, a Johannesburg-based food and car sales company, in the battle to control Adcock.

CFR, which sold shares to the public in Santiago in 2011, bought Laboratorio Franco Colombiano Lafrancol SAS in December for $560-million, giving it the biggest share of the Colombian market. – Bloomberg

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