JSE-listed Bidvest has moved to challenge Chile’s CFR Pharmaceutical’s R12-billion offer to buy out 100% of pharmaceuticals group Adcock Ingram with a multibillion-rand offer for a 34.5% stake in Adcock.
Following an unsuccessful R6.2-billion bid to raise its stake in Adcock to 60% earlier this year, the diversified group was, in collaboration with other consortium partners, unconditionally offering an immediate cash consideration of R70 a share, resulting in a direct investment of R4-billion.
Bidvest CEO Brian Joffe said in a statement that the group would also “shortly launch” legal proceedings on the back of legal advice given to the bidding consortium, which included black economic-empowerment (BEE) heavyweight, Community Investment Holdings (CIH).
The legal action related to the legal and regulatory aspects of the CFR/Adcock transactions.
Adcock said, in an issued cautionary shortly after the Bidvest announcement, that it was currently “considering its position” on the bid, as well as Bidvest's contemplated legal action, for which no details were provided, and would respond in due course.
In March, Bidvest, which currently owns a 4% stake in Adcock, tabled its offer to Adcock shareholders directly, after the Adcock board snubbed the unsolicited proposal, which lapsed on April 2, believing it to be “opportunistic”.
CFR threw its hat in the ring in July, announcing a R12.86-billion bid for 100% of Adcock in a cash-and-share deal, which was confirmed in November with a firm and binding offer of 175-million shares at R73.51 each. Just over R8.1-billion was expected to be settled in cash and the balance in CFR shares.
Bidvest’s latest move to obtain a stake in the embattled pharmaceuticals firm comes as CFR’s bid was set to be put to shareholder vote on December 18.
Newswire Reuters on Monday reported that, if the Bidvest offer was successful, it would be enough to allow the diversified group to vote against the CFR deal – which needed a 75% shareholder thumbs up – at the meeting.
Bidvest had also complained to the JSE about the CFR deal, accusing Adcock’s board of misleading investors about the levels of shareholder support, with CFR stating it had the support of shareholders owning 29.3% of Adcock and letters of support from those with a further 7.5%, giving it a total backing of 36.8%.
Major Adcock shareholder, the government-owned Public Investment Corporation (PIC), had also rejected CFR’s deal, saying in a November statement that the PIC management and investment committee had “come to the unanimous decision that it is not in the best interests of our shareholding to support the CFR offer in its current form”.
The Bidvest-led consortium planned to leverage its “strong empowerment credentials”, with BEE partner CIH said to be the largest fully compliant BEE company operating in South Africa’s pharmaceutical sector.
“Given CIH’s strong pharmaceutical credentials and Bidvest’s track record of value-enhancing investments and strong empowerment credentials, we believe that the consortium has the credentials to add value to Adcock; something which is clearly required,” Joffe commented.
He added that Bidvest’s level 3 BEE credentials, in addition to CIH, would “significantly add” to the total BEE participation in Adcock.
“CIH’s participation in the pharmaceutical sector dates back as far as 1992, when [it] entered the pharmaceutical wholesale arena. It has since operated with the objective of growing and progressing these interests to establish a stronger national and African presence.
“The entry into Adcock provides a further platform off which to leverage to achieve these objectives. CIH is a level 1 BEE contributor and, as regards its pharmaceutical interests in particular, has adopted a strategy of increasing efficiencies in local pharmaceutical production and job creation,” said CIH executive chairperson Dr Anna Mokgokong.
Joffe noted that, besides an enhanced BEE status and Adcock’s current existing BEE structures remaining in place, Adcock would benefit from a strong shareholder base and a continued primary listing on the JSE, with shareholders having a substantial residual direct participation in the performance and dividends of Adcock going forward.
There would also be no immediate upfront requirement to increase the current gearing of Adcock.
The offer was open for acceptance immediately, with a closing date to be announced shortly.