Bidvest torpedoes $1.2bn CFR bid for Adock

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BidvestJoffe Independent Newspapers. Bidvest chief executive Brian Joffe. Photo: Leon Nicholas.

Johannesburg - South Africa's Bidvest said on Friday it had raised its stake in drugmaker Adcock Ingram to just over 32 percent, enough to block a rival $1.2 billion Chilean bid and cement its chief executive's reputation as a canny dealmaker.

Bidvest's move - announced just hours before Adcock's annual general meeting was due to start - almost certainly ends its months of wrangling with CFR Pharmaceuticals over South Africa's second-largest drugmaker.

CFR is looking to build an emerging markets pharmaceutical powerhouse by adding fast-growing Africa to its operations in Latin America and Asia.

Bidvest chief executive Brian Joffe is interested in Adcock's portfolio of over-the-counter medicines and the chance to turnaround another underperforming company.

Santiago-based CFR has bid 12.8 billion rand ($1.2 billion) in cash and shares for the drugmaker, an offer backed by Adcock's board but requiring approval of shareholders with 75 percent.

“It's over,” Joffe told Reuters, adding he expected to increase his stake to just under 35 percent by the end of trade on Friday.

Joffe was rebuffed by Adcock last year when he tried to buy a controlling stake and then went directly to shareholders with a cash offer, aiming to add over-the-counter medicines to an empire that already spans shipping to mop sales.

“The CFR bid is not going to get approval. It has two options: walk away or go hostile,” said Alec Abraham, an analyst at Afrifocus Securities.

“But if CFR goes hostile, it would be difficult for it to bed down the deal and get synergies out when working with a hostile shareholder. So my guess is CFR will walk away.”

Shares of Adcock fell 3.6 percent to 67.51 rand at 11:44 SA time, below both Joffe's offer price of 70 rand and CFR's bid of 74.50 rand worth of cash and its own shares.

No one was immediately available to comment at Adcock or CFR.

BUYING SPREE

It was not clear whether Joffe would raise his stake beyond his stated 34.5 percent target although he is widely expected to make a full buyout offer given that he previously tried and failed to buy control of the company.

If his holding reaches 35 percent he would be forced to make an offer to minorities according to Johannesburg Stock Exchange rules.

It was also not clear if Joffe - now Adcock's top shareholder - would make an appearance at the company's annual general meeting due to start at 14:00 SA time.

Adcock shareholders are due to vote on the CFR deal next month.

Bidvest said in a statement it now holds 32.03 percent of Adcock, confirming a Reuters report it had bought the bulk of the record 39 million Adcock shares traded on Thursday.

Before its buying spree Bidvest had held around 9 percent of Adcock.

The 39 million shares traded on Thursday represented a record since Adcock's listing in 2008 and far outstrips last year's daily average of under 650,000 shares, according to Thomson Reuters data.

In addition to Joffe, South Africa's state-owned Public Investment Corporation (PIC) has said opposed the CFR offer.

The PIC, which owns 22 percent of Adcock, has said it doesn't want CFR shares because it wants to benefit directly from improvements at Adcock.

The PIC is also the top shareholder in Bidvest, leading to some speculation Joffe is working with the state pension fund to thwart CFR, something he has denied.

Adcock has suffered from lacklustre sales, inefficient distribution and an over reliance on its home market.

Some analysts say it would make a good fit for Joffe, whose reputation for turning around underperforming companies stems from a focus on cash flows, capital allocations and returns.

The 66-year-old son of Lithuanian immigrants, Joffe has built Bidvest from an apartheid-era startup into a sprawling conglomerate of more than 300 businesses ranging from freight and auto sales to frozen food. - Reuters


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