Johannesburg - The Adcock Ingram share edged to a close of R72.50 on Friday, prompting speculation that Chile-based pharmaceutical company CFR would soon launch its firm offer to shareholders. Friday’s close compares with the R73.51 contained in CFR’s potential offer to Adcock shareholders.
Although CFR first approached Adcock in May and in July made a potential offer to acquire 100 percent of the firm, Adcock shareholders have not yet received a firm offer from CFR.
The R73.51 offer to Adcock shareholders will be a mix of cash and CFR shares with cash of at least R47.29 a share and the remainder in CFR shares. Analysts believe that this unusually long delay reflects the complexity of this cross-border transaction. Approval is required from Chilean regulators before CFR issues the shares that will be used in the transaction.
A spokesman for the deal said the final mix of cash and shares had not yet been finalised because the issue of shares was subject to completion by CFR of its “capital increase” process in Chile.
Under Chilean law CFR shareholders must be given a pre-emptive right to subscribe for any new shares.
One local analyst explained that these legal requirements meant that CFR needed to have a strong indication of the level of support for its offer before it actually launched a firm offer to Adcock shareholders. “It’s rather like needing to know if your girlfriend will say ‘yes’ before you propose to her,” said the analyst.
This is why a key factor in CFR’s decision to make a firm offer will be whether or not significant shareholders such as the Public Investment Corporation (PIC) with 14 percent will back the deal.
Last week the PIC, which initially said it would prefer to see Adcock remain in South African hands, said that it would give an indication this week of whether or not it would support the transaction.
The PIC’s preference for a local controlling shareholder reflects the politically sensitive nature of the pharmaceutical business, which involves much government spending. Foord Asset Managers, which holds 10 percent of Adcock, has not given an indication of whether it will support the CFR offer.
Last week CFR and Adcock issued a statement in which they said they had received support from 45 percent of the shareholders. The statement said that part of this support was in the form of irrevocable undertakings.
It also appears that the 45 percent includes the black economic empowerment-related shares, which comprise 13 percent of Adcock’s total equity.
The transaction will require the support of 75 percent of shareholders allowed to vote at the meeting. - Business Report