Cir­cling

Finweek English Edition - - COMPANIES & INVESTMENTS -

Bid­vest is ex­er­cis­ing its le­gal right to make an of­fer di­rectly to Ad­cock In­gram share­hold­ers af­ter the 120-year-old com­pany told it that its ini­tial ap­proach to the board was not a proper of­fer and was not legally com­pe­tent. Bid­vest in turn has dis­missed Ad­cock’s re­sponse as le­gal­is­tic and overly de­fen­sive.

Ad­cock In­gram has been at pains in all of­fi­cial com­mu­ni­ca­tion to fol­low the let­ter of the law. It does not once re­fer to the Bid­vest ap­proach, sent by let­ter to man­age­ment on the 21 March pub­lic hol­i­day, and while CEO Jonathan Louw was on leave, as an of­fer. It var­i­ously de­scribes it as a “pro­posal” or “let­ter” but never ac­knowl­edges that a firm of­fer was put on the ta­ble. Rather it said it had “fun­da­men­tal le­gal and ma­te­rial pru­den­tial con­cerns with the Bid­vest let­ter,” and said it did not con­sti­tute a firm in­ten­tion to make an of­fer in terms of the Com­pa­nies Act.

That as­ser­tion has left mar­ket com­men­ta­tors, who point to the con­sid­er­able deal-mak­ing prow­ess of Bid­vest un­der CEO Brian Joffe, per­plexed. How could Joffe, who has built a ca­reer, rep­u­ta­tion and a R76bn busi­ness in less than a quar­ter of a cen­tury based on his abil­ity to cut a deal, not fol­low proper process? Bid­vest dis­agrees with Ad­cock’s le­gal opin­ion on the va­lid­ity of its of­fer and Joffe ap­pears to be short on pa­tience.

“All we want is for our of­fer to be put to Ad­cock In­gram share­hold­ers,” said Joffe in a re­cent ra­dio in­ter­view. The com­pany’s ap­par­ent in­tran­si­gence on this point, even though it has left the door open to a fresh ap­proach from Bid­vest and other suit­ors, means that Joffe is dis­pens­ing with the niceties. No­body in­volved in the deal is call­ing it hos­tile – but it is cer­tainly not friendly as Bid­vest has stated its i nten­tion to go di­rectly to share­hold­ers.

This is by no means a done deal even though the share price ratch­eted up strongly to over 6000c fol­low­ing the Bid­vest ex­pres­sion of in­ter­est and has not dropped be­low that level since. But Joffe has walked away from deals be­fore, as re­cently as March when a plan to ac­quire leather goods spe­cial­ist Brand­corp from Ethos Pri­vate Eq­uity f iz­zled out.

With Ad­cock how­ever, he ap­pears to have the bit be­tween his teeth for this un­der­per­former. Ad­cock, which car­ries the slo­gan: “Adding Value to Life” on its web­site has not done the same for its long­suf­fer­ing share­hold­ers. Our graph il­lus­trates the sub­stan­tial un­der per­for­mance of Ad­cock ver­sus its 2009 ac­qui­si­tion tar­get Ci­pla Med­pro, it­self now the sub­ject of a takeover by Ci­pla In­dia, and the rapidly glob­alised poster-boy of South African phar­ma­ceu­ti­cal i ndustr y Aspen Phar­ma­care.

“The re­luc­tance of the Ad­cock Board to pro­pose the Scheme is be­ing ra­tio­nalised and f r us­trated by i nsub­stan­tial and ir­rel­e­vant tech­ni­cal

Brian Joffe

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