CFR puts R12.6bn offer on the table for Adcock Ingram
CHILE’S largest pharmaceutical company CFR tabled its formal bid of R12.6-billion ($1.2billion) for Adcock Ingram on Friday, finally nailing a stake in the ground, despite the lack of clarity over whether it has enough support to make the deal happen.
The stumbling block remains the Public Investment Corporation, which owns 18.6% of Adcock. The PIC said last week it wouldn’t support the deal “in its current form”. Though there is no sense yet of whether the PIC has softened its stance, it seems unlikely that CFR would have taken such a bold step without tacit support from Adcock’s largest shareholder.
CFR’s CEO Alejandro Weinstein, who said previously that it was crucial for government to support the deal, flew into Johannesburg this week without an appointment to meet the PIC. The PIC’s only stated reason for rejecting the offer was that it was not a “binding offer”. But Friday’s event changes all of this.
Weinstein had one meeting with the PIC. This is believed to have provided the momentum to move forward with the deal.
A fund manager said CFR has to be respectful of the PIC. “They don’t want to just be walked over; they want to exert the clout which they have if they so wish,” he said.
There were also procedural reasons for tabling the offer on Friday, so that it could be passed this year. Shareholders need 21 working days to consider the offer, and so they will now vote on CFR’s proposal on December 18.
Officially, the Chilean company still only has the support of 45% of Adcock’s shareholders, including irrevocable undertakings from Prudential, Mazi Visio Capital, Absa Asset Management, Stanlib Investment Management, Afena Capital, 36One Asset Management and Sanlam Asset Management.
They want to exert the clout which they have if they so wish
But the green light will only go up once CFR has 75%.
Adcock’s share price rose as much as 4.3% at one stage on Friday, before closing 2.5% higher at R71 at close of trade.
Adcock chairman Khotso Mokhele described the offer as a “milestone achievement” securing Adcock’s future in a global market and one of the largest foreign investments in the country in recent years. Crucially, Mokhele said at the press conference on Friday he was confident that the PIC would vote in the company’s favour.
Adcock CEO Jonathan Louw said they had been prettying up the bride through significant capital spending to take it to the altar, by spending almost R2billion to upgrade the company’s manufacturing facilities, to make them relevant to the global pharmaceutical environment.
Weinstein said he would not accept less than 100% of the group. Scheme participants will be offered a mix and match facility. The 95-year-old Chilean company said that a minimum of 51% and as much as 64% would be in cash, with the balance in CFR shares.
JP Morgan, appointed by the Adcock board as independent experts, said the offer was fair and reasonable.
There has been speculation that Actis may put in an offer for the pharmaceutical company should the CFR deal not materialise, and Bidvest CEO Brian Joffe has indicated he is also adopting a wait-and-see view on the situation.
South Africa will make up CFR’s largest market with about 41% of total sales and second would be Colombia. The enlarged group would have a primary listing in Santiago and a secondary listing on the JSE and a combined market capitalisation of about $3-billion.
Management reiterated that further engagement with the PIC will be required now that the firm intention has been made. The PIC still hadn’t given its support, chief investment officer Daniel Matjila told Bloomberg.