Shareholders join the battle over Adcock Ingram

The gloves came off this week as two companies and a dominant shareholder battled it out for control of the pharmaceutical company Adcock Ingram.

Heated behind-the-scenes negotiations escalated into open hostility in public this week, with Chile’s CFR Pharmaceuticals and the Public Investment Corporation (PIC), a 20% shareholder in Adcock, exchanging heated comments in statements and through the media.

Then, on Wednesday, at a shareholder meeting, Bidvest, which has a 7.5% stake in Adcock, argued unsuccessfully against a decision to postpone the vote on the R12.8-billion takeover bid by CFR until next month, and raised objections with the chairperson, including whether the decision was legally permissible.

The Adcock board supports the offer and said this week that it will go to court to fight a Bidvest legal challenge around regulatory issues intended to stop the proposed transaction.

Ten months of discussions involving Adcock Ingram moved up a notch this week after a revised offer was put on the table at the weekend by CFR, upping it to R74.50 from R73.50 a share, which would include cash and shares. The increase was clearly aimed at winning over the PIC.

When the PIC turned down the offer, having already said it would not support a cash and shares deal, underlying tensions came to the fore.

CFR has accused the government fund manager of protectionism, saying the PIC’s only reason for opposing the deal is that CFR is a foreign company.

The PIC tends to hold its cards close to its chest when it comes to negotiations but this week its chief investment officer, Daniel Matjila, called CFR “a liar” for saying it had discussed a new R74 share offer with the PIC.

CFR chief executive Alejandro Weinstein said in his statement on Tuesday that the CFR had met Matjila in August and that, “at these meetings, Matjila did not raise any concerns around price or evaluations … but focused instead on BEE elements”.

Weinstein said they agreed to increase the black economic empowerment ownership of Adcock Ingram “within a reasonable time frame, as required by the department of trade and industry”.

The PIC was not available for comment.

A source close to the deal said CFR believed that its R74.50 a share offer would be accepted by the PIC.

Dennis Dykes, the chief economist of Nedbank, said that, despite CFR’s criticism, it would appear that the PIC has a history of looking at deals from “an investment point of view”.

“They need to look at price, whether the deal should be made up of cash or equity, and it seems from what they have said that they believe the price is below value.”

Some investors who attended Wednesday’s meeting said the move might just be delaying the inevitable. It appears that Bidvest will vote with the PIC, which, unless it has a sudden change of heart, has said it will not support the deal as it stands.

The bid requires a 75% approval.

Adcock has been in the news since March when Bidvest first made a bid for 35% of the company.

Bidvest, which offered shareholders R70 a share in cash insists that the CFR deal is not as good.

Adcock has a market capitalisation of about R12.3?billion.

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