CFR soldiers on in its bid for Adcock

But Bidvest has a game plan up its sleeve

SHORTLY after we land on Monday morning at OR Tambo from Santiago in Chile, cellphones are switched on.

Messages beep instantly with the news that a consortium led by Bidvest CEO Brian Joffe has put in a bid for Adcock Ingram, the underperforming pharmaceutical company which is already the target of a takeover offer from Chile’s CFR.

The prospect of a battle for Adcock generates a flurry of interest among the small group of journalists who have just returned from a whistle-stop tour to see a manufacturing plant and meet executives of CFR, which three weeks ago put in its binding offer for Adcock Ingram.

At the airport, we get picked up by a Bidvest bus. Once inside, we walk past a Bidvest bank en route to fetch luggage. It speaks of how Joffe’s group operates: pinpoint particular areas, such as airports, hospitals and schools, find out what they need and package what is needed to serve them. It’s a reminder of just how pervasive this R80-billion market cap conglomerate is in South Africa.

As the week unfolds, so does the corporate drama. By the end of the week, it is understood that CFR laid a complaint with the Takeover Regulation Panel saying the Bidvest partial offer failed to comply with Companies Act regulations and takeover regulations, and that the detail would appear in a legal filing which could appear as early as next week.

It is also understood that Baxter Healthcare, with which Adcock has a pivotal distribution agreement, has sent a letter to CFR, confirming support for the Chilean company and that it does not have an understanding with any other company.

CFR is fairly unknown locally, but has been growing outside of Chile for the past 25 years, mainly in Latin America and to some extent in Southeast Asia.

It is the largest pharmaceutical company in Chile, Colombia and Peru. It has 14 manufacturing facilities and operates in more than 20 countries around the world. CFR achieved a compound annual revenue growth rate of 22% for the period 2009 to 2012.

Bidvest had a compound growth rate in headline earnings of 25% over a 25-year period.

The deal has dragged on, and the consortium’s offer this week means the outcome is more uncertain than before. Bidvest’s offer had Joffe’s consortium offering R70/share in cash for up to 34.5% of Adcock, an offer totalling nearly R4-billion.

The consortium is working to derail the CFR bid, taking legal action against the company and saying it is illegal to use Adcock’s assets to fund the transaction. CFR said this was not the case; it had done its homework, and assets would be used only to fund the transaction should the deal take place.

Brian Joffe said: ‘‘This is the very point, which makes the offer illegal.”

Some say Bidvest is looking to get control of Adcock through the back door, as once the consortium reaches 34.5% it will stop buying shares. (It now owns nearly 7% of Adcock).

Bidvest’s game plan is to position itself in the best possible spot, should its transaction fail, for Bidvest to be successful.

But where Adcock spurned Bidvest, it supports CFR.

Joffe points out: “Jonathan (Louw) and Mr Hall don’t get any incentive payments if the consortium is successful.

“They only get it if there is a 100% buyout,” he said.

CFR’s CEO Alejandro Weinstein wants to create a southern hemisphere-focused pharma group. He has known the company for more than 10 years through Nick Dennis, former CEO of Tiger Brands, which had an investment in Carrossi in Chile. (Adcock was spun out of Tiger).

The offer for Adcock was not impulsive. Weinstein visited Adock several times but did not think the group was for sale.

Only when Bidvest made its offer did the group, with a market value of $2.2-billion, spring into action.

“We see a parallel within Africa on the situation of Adcock as to how to go from South Africa to sub-Saharan Africa, with the situation where we were in the 1980s in Latin America, 30 years ago. We were only based in Chile and now we are all over the place,” he says.

CFR wants access to Adcock’s plants; access to its strong portfolio of over-the-counter drugs; and it would get a springboard into sub-Saharan Africa.