Bidvest attempts to torpedo $1.2bn Adcock takeover

A Chilean group's $1.2-billion bid for South African drugmaker Adcock Ingram was challenged on two fronts on Monday, as a group led by Bidvest sought nearly a third of Adcock's shares and launched a court action against the bid.

Bidvest had failed in an attempt to buy control of the nation's number two drug firm in March and its new share offer would give it a holding big enough to torpedo the rare Chile-South Africa tie up – and possibly launch a fresh attempt at getting control of the underperforming company.

Responding to CFR Pharmaceuticals' bid which was formally launched last month, Bidvest teamed up with black investment group Community Investment Holdings (CIH) to offer R70 per share to raise its stake to as much as 34.5% of Adcock, for nearly R4-billion.

Bidvest already owns 4% of Adcock.

The two, which if successful would emerge with a holding of just below the 35% mark that would trigger a mandatory offer to minorities, also launched a lawsuit to challenge the legal and regulatory compliance of CFR's bid.

"We believe that the consortium has the credentials to add value to Adcock, something which is clearly required," Bidvest's founder and chief executive Brian Joffe said in a statement.

Adcock had rejected Bidvest's previous offer for a 60% stake as "opportunistic".

Slow sales
Adcock, which has been hit by slow sales and dwarfed by domestic rival Aspen Pharmacare's aggressive push into overseas markets, has said the CFR deal is vital to its survival. CFR has said the acquisition would create an emerging markets pharmaceutical powerhouse with a presence in 23 countries.

Under the CFR offer, Adcock shareholders could receive as much as R47.29 per share and up to 15.44 new CFR shares per Adcock share. The cash portion would represent nearly R8.1-billion in direct foreign investment into Africa's largest economy, a positive for the rand currency.

CFR said in a statement it believed its offer was the best for the future of the company.

Yet Adcock's top shareholder, the state-owned Public Investment Corp (PIC), has concerns about control of the company passing into foreign hands and about the share portion of the deal, a source familiar with the fund's thinking has said.

The PIC, which manages pension funds for government employees, is also the top shareholder in Bidvest, according to Thomson Reuters data.

Some queried the merits of Bidvest's move. "I don't see the synergistic benefits and value-enhancing elements we saw in the CFR deal," said one Adcock shareholder, who declined to be identified, adding his fund would vote in favour of the CFR deal at a meeting in two weeks' time.

Bidvest's offer opens immediately. Shares in Adcock were up 0.1% at R70.16, outperforming a 0.4% decline in the Johannesburg Stock Exchange All-share index.

Compliance
Sometimes called the "General Electric of South Africa" because of its diverse operations, Bidvest has businesses in freight, banking and food services and operates in Europe, Asia, Australia and southern Africa. The son of Lithuanian immigrants, Joffe has a reputation as a cost-cutter and for buying underperforming companies that can benefit from his company's vast distribution network and customer base.

Bidvest did not elaborate on the content of the lawsuit, only saying it would challenge compliance with legal and regulatory aspects of the transaction.

At least one other Adcock shareholder has filed a complaint against the drugmaker with the Johannesburg bourse, accusing it of misleading investors about the level of backing it had for the CFR bid.

To go through, CFR's deal requires approval from holders of 75% of Adcock shares at a meeting on December 18, so if the Bidvest offer is successful it would be enough to vote the CFR deal down.

Adcock said in statement it was considering its position regarding Bidvest's new offer and the lawsuit. – Reuters

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Tiisetso Motsoeneng
Tiisetso Motsoeneng works from Johannesburg. Deputy Editor: Business Day in Johannesburg, home to Africa’s deepest capital market. Tiisetso Motsoeneng has over 285 followers on Twitter.
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