No hard feelings, let’s talk deals — Joffe
BITTER rivals in the gruelling 10-month fight for Adcock have now seemingly put the feud behind them to investigate ways of working together.
Bidvest CEO Brian Joffe confirmed this week at a shareholders’ meeting that Adcock was talking to Chilean company CFR Pharmaceuticals — which a Bidvest-led consortium outwitted to gain control of Adcock — to explore opportunities the Chilean group identified when it bid for the drug manufacturer.
Joffe became chairman of struggling pharmaceutical business Adcock last month after CFR, Chile’s biggest drug producer, walked away from its bid of R12.8-billion cash and stock to buy the company, when Bidvest built up a 34.5% stake in the group.
Adcock said this week the Public Investment Corporation had increased its stake in Adcock to 25.17%.
The focus for Joffe now is on revitalising the business.
As Wayne McCurrie, head of Momentum Wealth Portfolio Management, said: business is business. “If CFR and Adcock, under Bidvest, can come to an arrangement that’s mutually beneficial, why not?”
CFR and Adcock saw synergies. That’s why they were talking to them. It was to their mutual advantage. Adcock sat with a lot of idle capacity, and could manufacture on CFR’s behalf, said McCurrie.
Jean Pierre Verster, a fund manager at 36ONE Asset Management, said the possibility of Adcock and CFR working together could be viewed with irony, “but I see it as pragmatic. Just because Bidvest had a tussle with CFR doesn’t mean there’s not value to extract”.
Business could be done in the form of licensing agreements.
Linking up with CFR Pharmaceuticals would enable Adcock to get a foothold in South America to market Adcock’s products, particularly ARVs. CFR would be able to use Adcock manufacturing facilities in SA, much of which are idle after it spent R1.5-billion expanding its factories and distribution channels but not its pipeline.
CFR’s facilities are pumping. One reason it wanted to buy Adcock was to divert manufacturing to its half-empty facilities.
Verster said Adcock had ample capacity, and was underweight in both scheduled and non-scheduled medicines.
“Joffe had cast aspersions on CFR [because], had the deal gone through it would be highly indebted, but not on their ability to run a good business.”
The only people who have made money on the deal so far are bankers and advisers. Adcock’s costs related to the failed CFR bid are about R140-million.
Bidvest paid R70 a share for a third of Adcock (its share price now sits at about R55). This would imply that the value of Bidvest’s stake has dropped by more than R800-million.
Adcock’s share price fell further this week after it said revenue of its southern Africa business fell 6% in the two months to end February.
The share price ended the trading week on Thursday at R55.84, down 21.24% so far this year.
The group said that gross profit as a percentage of sales was under “extreme pressure”. Of concern were its over-thecounter and prescription generics portfolios. Rand depreciation has raised the cost of imported ingredients.