Bidvest to unload pharma folly
Noncore assets set to go, including Joffe’s unwise Adcock deal
● Four years after a protracted battle with a Chilean rival for control of Adcock Ingram, industrial giant Bidvest wants to dispose of its stake in the company.
The intention to sell follows the group’s decision to divest from noncore assets, which include an interest in Comair, owner of kulula.com.
Bidvest’s pursuit of the drug manufacturer was spearheaded by its then CEO, Brian Joffe, resulting in the group acquiring a 30% stake valued at R3.2bn. It currently owns more than 38% in the company, which Chilean drugmaker CFR Pharmaceuticals tried to buy outright in 2014.
Bidvest told Business Times it had previously indicated it was looking to divest its noncore assets at fair value. Its core divisions are services, freight, office and print, automotive, financial services, commercial products and electrical.
Questionable deal
The pharmaceuticals sector was a departure from its focus areas, making the decision to buy into Adcock questionable.
The fight over control of the drug manufacturer lasted 10 months, with the Chilean company eventually calling off its R12.8bn cash and stock offer. The bid valued Adcock at as much as R74.50 a share.
Analysts have been critical of one of the last major deals struck by Joffe before his resignation from the group in March 2016. The company has admitted that it overpaid for a controlling stake in a company that was struggling at the time. A year after its purchase, Bidvest wrote down the investment to the tune of R1bn.
Mark Hodgson, an analyst at Avior Capital Markets, said he wouldn’t call Bidvest’s Adcock investment a good one and, had it not been for Joffe, it wouldn’t have happened.
In the four years since Bidvest bought its initial stake in Adcock, the company’s shares have hardly moved. Since the end of January 2014, the share has climbed 5.32%, compared to a more than 30% climb in the JSE all share index.
The firm wants to “get out” and the pharmaceutical company’s most recent results are a positive in Bidvest’s attempts at getting a market-related price for its noncontrolling stake, Hodgson said.
In its annual results released this week, Adcock reported a 20% rise in trading profit and a 10% increase in turnover.
Among the parties analysts said Bidvest would probably be interested in selling its stake in Adcock to a BEE consortium.
Quizzed on whether his investment firm, Long4Life, would be interested in acquiring his alma mater’s stake in Adcock, Joffe said his company was not involved.
After leaving Bidvest, Joffe founded Long4Life, which he listed in April last year.
John Thompson, an analyst at Investec Asset Management, said he believed that Bidvest would sell its Adcock shares at some point, but it was not a good idea to do so immediately as Adcock had performed well. “They have come a long way,” he said. Bidvest releases its annual results tomorrow.
Outside of its Adcock stake, Bidvest’s other noncore interests include a 27.2% stake in Comair and a 6.75% interest in India’s Mumbai Airport.
They wouldn’t have bought it and gotten involved if they had to go back
Mark Hodgson
Analyst at Avior Capital Markets