Joffe gets Adcock, but how will he control it?
THAT Brian Joffe would assume control of Adcock Ingram with the support of the Public Investment Corporation (PIC) was inevitable from the day in December 2013 that his group, Bidvest, announced its intention to acquire a slice of the local pharmaceutical company.
Bidvest’s R70-a-share offer for 34.5% of Adcock came in the face of a very popular but rather vague bid from Chilean pharmaceutical group CFR.
All that needed to be revealed were details of how Joffe would exert the sort of control he requires for his management style. This week, in a series of announcements, some of those details were disclosed.
The subdued response from investors could be attributed to a few factors: they’re unhappy about the refinancing of a larger BEE stake in Adcock; they’re puzzled by the implications of the relationship with the PIC; they suspect Joffe has taken on more than he can handle; or the detail in this week’s announcements need more time to be thrashed out.
Analyst Warren Dick called on Bidvest to provide some critical details on the BEE restructuring scheme — such as how many shares Adcock shareholders will have to exchange to ensure the BEE shareholders get the desired stake? And what will the Newco shareholders receive for the Adcock shares they surrender — no less than R52 and no more than R72?
One industry analyst remarked: “The whole thing seems remarkably contrived and at this stage still unclear, but it was inevitable that Bidvest and Joffe would emerge in control and that the PIC would be backing them.”
One unexpected development was the nature of the PIC’s involvement. PIC chief Dan Matjila has described it as joint control without management control.
Although the PIC and Bidvest appear to have a good working relationship, the PIC is in the difficult position of having limited options because of its size.
“Because of its size it isn’t really free to decide whether or not to sell its shares in any company, it’s in its best interests to work out constructive arrangements regarding management,” said a BEE analyst.
It is also likely that an attractive — for the BEE partners — restructuring of the Adcock BEE deal was a precondition for the joint control arrangement
PIC chief Matjila described it as joint control without management control
with the PIC.
Although the PIC may be targeting a more engaged shareholder role for itself, the disappointing experience of other powerful institutional investors across the globe suggests it should be wary. There is the growing likelihood that a more hands-on strategy from the PIC could see it clashing with competition authorities.
The PIC’s funds are so large it is inevitably invested in one or two of each of the major players in sectors across the economy.
The possible tie-up between two of the countries largest four cement producers, Afrisam and PPC, is a case in point and smacks of PIC manoeuvring. It is unlikely to go unchallenged by the competition authorities.