Adcock and Chileans in charm offensive over buyout
CAPE TOWN — Drug maker Adcock Ingram has mounted a charm offensive to woo government support for what could prove to be a controversial buyout by Chile’s CFR pharmaceuticals.
Adcock Ingram’s independent board said yesterday that it would recommend to shareholders that they accept CFR’s R12.6bn cash and share offer.
“We have been engaging with key ministries in government, and that engagement will continue,” board chairman Khotso Mokhele told reporters.
The transaction would have a positive effect on long-term employment and drive exports, said Mr Mokhele, alluding to the fact that imports of pharmaceuticals are the fifth-biggest contributor to SA’s trade deficit, with drug imports of more than R21bn in 2011.
The government has often voiced opposition to companies being bought out by foreign firms. When India’s Bharti Airtel and local cellphone operator MTN called off merger talks in 2009 then communications minister Siphiwe Nyanda said MTN should remain a domestic company. In 2011 several ministries opposed the Competition Tribunal’s approval of Massmart’s merger with US retail giant Walmart.
CFR is 73% controlled by the family of CEO Alejandro Weinstein, and is Chile’s biggest drug maker. It listed on the Santiago Stock Exchange in 2011, and has a presence in Latin America, Southeast Asia, North America and Europe, with more than 20 manufacturing sites. It made a non-binding proposal to acquire 100% of
Adcock Ingram on July 3, but did not specify the cash-to-share ratio at the time. Yesterday the companies said CFR would settle between 51% and 64.3% of the purchase with cash, and the balance with new CFR shares.
If the deal goes through, CFR planned to move some of its production to SA to take advantage of Adcock’s underutilised facilities, said CFR executive Daniel Salvadori. CFR would also export some of Adcock’s products to Latin America, and invest between $20m and $30m in machinery and research and development in Adock Ingram’s businesses in SA and India.
Adcock would be an important part of the merged business, and was expected to generate 40% of the combined entity’s revenue.
CFR has previously said it plans to seek a dual listing on the JSE and maintain Adcock brands if the deal went through.
Mr Mokhele said the board had received three nonbinding proposals to acquire Adcock. Bloomberg reports that CFR fended off competition from London-based private equity firm Actis and Bidvest Group. Earlier this year, the board advised shareholders to reject an offer by Bidvest to acquire a 60% stake in the drug maker.
Adcock Ingram is held by a wide range of institutional investors, the biggest being the Public Investment Corporation (PIC) with 14% of its stock. The PIC said in May that it would prefer the firm to be bought by a local player.
Yesterday, Mr Weistein said CFR had concluded nonbinding memoranda of understanding with Adcock Ingram’s BEE shareholders, comprising both strategic BEE shareholders and qualifying staff, to remain invested in the company.
Adcock’s employee incentive schemes participants would also benefit from either the acceleration of their share options or an equitable offer from CFR, he said.