Adcock deal still on the boil

Shareholders are divided as new suitors enter the fray

THE pending offer from CFR Pharmaceuticals for Adcock Ingram is still seen as the top offer for the South African pharmaceutical company, despite the emergence of competing bids.

Adcock said this week it was still in exclusive talks with the Chilean suitor after Bloomberg revealed that Actis, a Londonbased private equity company, had proposed an offer of R70 a share late last month on condition it got the same information as given to CFR, which had offered R73.51/share. More than 80% of the Actis offer would be in cash.

News that other companies are interested is likely to be seized on by some Adcock shareholders who are lukewarm on the Chilean bid.

Already, the Public Investment Corporation, which owns about 14.4% of Adcock, has said it wants a local company to buy Adcock, and wants the pharmaceutical firm to remain listed on the JSE.

Oasis, which holds 2.3% of Adcock, has also said it would not support the bid for various reasons — including that CFR is an overseas company.

Yet some shareholders have already indicated they would support the deal — suggesting investors are split on the merits of the deal.

Adcock said the board had not received any proposal it regarded as “being more favourable” than the CFR offer — though CFR has yet to provide details on its nonbinding offer.

One shareholder said that a bid from private equity such as Actis at R70 or others would take away any meaningful participation in the value to be unlocked from Adcock.

The CFR bid values Adcock at a potential R73.51 a share and the opportunity to remain invested in a bigger, more diversified international player. The shareholder does not expect anything to change until CFR makes an offer; other bids may emerge thereafter.

CFR’s bid amounted to R73.51/share when it was made, but part of this will be paid in new shares in CFR, so the final price has yet to be determined.

Another Adcock shareholder, who asked not to be named, said he didn’t expect anything to change until CFR put a firm offer on the table — which may prompt other bidders to break their cover too.

CFR, Chile’s largest drug man-

CFR this week said profit jumped 89% in the second quarter

ufacturer, appears to be thriving. This week it said profit jumped 89% in the second quarter, compared with the previous year. And CFR is getting its ducks in a row for the Adcock bid. Shareholders have approved a $750-million increase in capital, which could provide more than half the funding needed for the deal, with the rest financed through CFR’s own resources and long-term debt.

Behind the scenes, CFR is still conducting its due diligence into the South African company, checking on all the multinational licences, probably assessing dossiers currently in the pipeline and other important arrangements — most notably with Baxter which contributes 20% of earnings.

The offer of R73.51 is about 9% above Adcock’s current price.