Bidvest to pull out all stops to buy Adcock Ingram

CE Joffe embarks on historically risky hostile takeover bid

INVESTMENT group Bidvest is hoping to break the stigma that hostile bids fail in SA in its mission to buy drugs company Adcock Ingram. The perception used to be that hostile bids were risky in this country. Many have failed in the past few years. Harmony failed to buy Gold Fields in 2004. Nedcor tried to buy Standard Bank in 1999 with the financial backing of Old Mutual, to no avail but a bunch of costs for Nedcor.

BIDVEST, the international services, trading and distribution group, is hoping to break the stigma of hostile bids failing in SA, in its attempt to buy the country’s second-biggest pharmaceuticals firm, Adcock Ingram Holdings.

Bidvest CE Brian Joffe sent Adcock a letter late last month offering to buy 60% of the drugs company for R6.2bn. Since then, the two groups have been quarrelling, with Adcock’s board saying Mr Joffe’s offer is invalid because it had not come from the Bidvest board, but from him.

Mr Joffe says Adcock’s board is making up excuses not to go to shareholders. He now says the bid has gone hostile. “It does not matter now if the (Adcock) board won’t do its duty and talk to shareholders. Bidvest will go to them directly then,” he said on Friday.

The perception is that hostile bids are risky in this country. Many have failed in the past few years. Mining firm Harmony Gold failed to buy Gold Fields in 2004. Nedcor tried to buy Standard Bank in 1999 with the backing of Old Mutual, but to no avail, leaving it with a bunch of costs.

Boards that did not want corporate predators to take over their companies normally appealed to regulatory bodies and other referees. This method has found some success in SA. But the perception that hostile takeovers do not work may change.

In 2011, Japanese industrial and automotive paints group Kansai Paint bought Freeworld Coatings, the maker of SA’s iconic Plascon paint brand.

The acrimonious deal, which gave Kansai a springboard into Africa, was strongly resisted by Freeworld chairman Bobby Godsell at the time, and by an executive team led by former Freeworld CEO Andre Lamprecht.

However, it was eventually approved, with SA’s competition authorities placing numerous conditions on the takeover. The transaction was recognised as deal of the year on Wall Street, in the range of takeovers valued between $100m and $500m.

Several hostile bids have been taking place in the South African market. Property groups Growthpoint and Redefine have been fighting for control of Fountainhead Property Trust, with Redefine buying a stake in Fountainhead to block Growthpoint’s offer for Fountainhead’s portfolio.

Eqstra, an industrial, construction and mining equipment dealer and player in the open-cast mining space, has been trying for more than a year to buy construction and engineering group Protech Khuthele. But so far it has been stoutly rebuffed.

Bidvest would take a while to work through all the key owners of Adcock, a firm with a diversified holding. According to Bloomberg, as many as 18 institutions hold 1% or more of shares.

SA’s government pension fund is the largest holder in Adcock, with about 14%. The next biggest is US financial company State Street, which has 3.3%, and then SA’s Liberty Life, which holds about 3.2% of shares in issue.

Bank of New York also has about 3%, while Tiger Brands, the company that unbundled Adcock in 2008, has 2.47%.

Market commentator Gerhard Lampen said on Friday Mr Joffe might push hard to buy Adcock, even if hostile bids in SA had a chequered record.