Ann Crotty
The prospect of South Africa losing ownership of another pharmaceutical company has been raised following reports that Adcock Ingram has received a number of non-binding proposals for part or all of the group.
A change of control at Adcock, one of the country’s largest pharmaceutical companies, could materialise at the same time as the competition authorities launch a market inquiry into the private health-care sector.
French pharmaceutical group Sanofi, US-based Baxter, Israel’s Teva and UK-based Reckitt-Benckiser are some of the names that have been mentioned as possibly being behind the proposals.
Adcock’s share price eased back 1.11 percent to close at R66.75 on Friday, having surged to a 24-month high on Thursday following news about the non-binding proposals.
In a Stock Exchange News Service announcement on Thursday, Adcock said the non-binding proposals, which were apparently received from a number of parties, involved offers for a controlling interest as well as for 100 percent of the company. Adcock would not tell Business Report how many offers had been received.
One industry analyst said that because of a number of licensing agreements between Adcock and international partners, it was unlikely that one international drug company would be able to buy 100 percent of Adcock.
“These licensing agreements usually have a ‘change of control’ clause that enable the foreign principal to change the terms of the agreement, including cancelling it, if there is a change of control,” said the analyst, who added that Adcock would be worth considerably less without those agreements.
A sale involving a number of parties could see Baxter purchasing Adcock’s Baxter-related business, Reckitt-Benckiser acquiring its over-the-counter products and Teva buying Adcock’s generics business.
Teva is the world’s largest maker of generic drugs.
Adcock’s strong cash flow could be a draw card for private equity players. However, the prospect of a private equity buyer being involved is diminished by the fact that shareholders’ expectations ensure this will be an expensive deal and potential funders might worry about the current executive team’s ability to generate adequate returns.
Meanwhile, Bidvest chief executive Brian Joffe did not dismiss the possibility of a bidding war. But Joffe told Business Report there would have to be “equal access to information” for all the parties.
Bidvest’s lapsed cash and share offer, which was valued at R65 an Adcock share, was based on Bidvest having no access to information on Adcock. At the time of that offer, Joffe told Business Report: “I believe the terms of our proposal to the Adcock board are reasonable given that we are not going to do a due diligence.”
Access to information could justify a higher offer from Bidvest. Yesterday Joffe said: “If we could get it at the right price we would do the deal but there’s no point in buying something just to say you’ve been successful.”
Bidvest’s offer was to be paid half in cash and half in its own shares with one Bidvest share for every four Adcock shares. At the time the offer was made Adcock was trading at about R56. It surged to R63 following the announcement.
On Friday, Bloomberg reported that analysts at JPMorgan suggested that a bidding war could push Adcock up to as much as R75.80.