The independent board of directors of pharmaceuticals group Adcock Ingram on Tuesday said it would not propose a scheme of arrangement to implement the proposed buyout by Bidvest of a 60% stake in the company.
JSE-listed Bidvest announced on March 22 that it intended to increase its 2.54% stake in Adcock Ingram to 60% in a cash-and-share deal valued at about $700-million.
However, Adcock Ingram chairperson Dr Khotso Mokhele said a few “fundamental legal and material prudential concerns” had emerged as the pharmaceutical company reviewed Bidvest’s letter of intent.
The group slammed Bidvest’s approach, which it said was “nothing more than a nonbinding proposal”, as it created a potential prejudicial impact on Adcock Ingram shareholders, while enhancing expectations in the market of the transaction being concluded.
“In particular, the board is concerned about the high level of conditionality, including walk-away rights, the absence of comparable offers for two of our other key stakeholders, namely our black economic-empowerment partners and employees, who are participants in our group share incentive scheme,” the company explained in a statement.
Mokhele further pointed to a lack of insight into the strategic rationale for Bidvest’s proposal and the potential benefits for Adcock and its shareholders in a Bidvest-controlled pharmaceutical company.
Adcock added that it would not dismiss any future bid proposed in good faith and which could promote the interests of Adcock Ingram, while creating value for shareholders. The firm said it would keep an “open mind” should Bidvest table a revised proposal addressing the Adcock board’s concerns.
Meanwhile, Bidvest withdrew its cautionary announcement in relation to the deal on Tuesday.