Adcock may stay in limbo until mid-year

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Pharma REUTERS A pharmacist counts pills in a pharmacy.

The controversial bid for Adcock Ingram launched by Chile-based CFR Pharmaceuticals in July last year could remain unresolved until midway through this year.

This follows CFR’s decision to increase its offer, the decision to postpone last month’s meeting of Adcock shareholders and the legal challenge launched by Bidvest last year.

At the same time, it is unclear what is happening with the irrevocable undertakings given to CFR in support of its initial offer.

Business Report was unable to get comment from CFR yesterday but analysts said irrevocable undertakings were usually given for specific terms of a transaction and for a specific period.

That period usually expired shortly after the scheduled shareholder meeting.

Because the offer’s terms had changed, although only slightly, and the shareholder meeting had been postponed, CFR might have to secure extensions to those irrevocable undertakings and secure a roll-over of the approval of regulatory bodies such as the JSE and Reserve Bank.

While regulatory approval is expected to be straightforward, securing a roll-over of the irrevocable undertakings may be more complicated – unless the Public Investment Corporation (PIC) swings in support of the CFR bid.

During the year-end holiday period Adcock announced that the PIC had increased its stake in the company from 19 percent to 22.4 percent. It also said that Foord fund managers had increased its stake to 15 percent.

Foord has not given any indication as to whether or not it supports the CFR offer but its decision to vote in support of postponing the Adcock shareholder meeting has been interpreted as indicating support for CFR.

However, if the PIC and Bidvest, which has 8 percent, remain opposed to the CFR bid, it will fail even if all the other shareholders vote in support of CFR. The CFR bid requires the support of at least 75 percent of Adcock shareholders attending the shareholder meeting.

In terms of the revised offer, which was agreed to by CFR shareholders on Friday, Adcock shareholders will receive R74.50 in cash and CFR shares, assuming a value of R2.334 per new CFR share. The original offer, which was due to be voted on by Adcock shareholders on December 18, valued the offer at R73.51 per Adcock share.

Adcock has indicated that it expected the shareholder meeting to vote on the revised offer to take place in mid-February.

Yesterday a spokesman for Sanlam Investment Managers declined to comment on the status of the irrevocable undertaking it had given to CFR, saying it could not comment because of the sensitive nature of the issue. Business Report was unable to get a response from other institutional shareholders that had given irrevocable undertakings to support the initial CFR offer.

The PIC did not respond to requests for comment but analysts believe that given the nature of its concerns with the CFR offer, it is unlikely to have changed its approach since its late December comments.

In late December, the PIC’s chief executive, Elias Masilela, indicated that the CFR bid did not fully value Adcock’s growth potential. Part of that growth potential is expected to be realised in Africa. Last week Adcock said that it planned to double its sales from African countries outside South Africa to R1 billion within four years.

Masilela also indicated that he had concerns about being invested in a family-controlled business, pointing out that the merged CFR/Adcock business would be majority owned by CFR’s founders, the Weinstein family.

Yesterday the Adcock share price eased back 23c to close at R70.62 on the JSE.



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