Joffe takes Adcock war to the courts

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Independent Newspapers

Brian Joffe. File photo: Leon Nicholas

Johannesburg - The corporate contest waged by Bidvest against CFR Pharmaceuticals’ bid for control of Adcock Ingram may be decided in the courts after Bidvest launched a high court application yesterday to have the Chilean company’s plan declared unlawful.

The resort to the court came as CFR chief executive Alejandro Weinstein told a press conference that Bidvest chief executive Brian Joffe and he had met twice in Johannesburg last week at Joffe’s invitation in a bid to thrash out a solution to the battle.

Weinstein told the journalists: “Joffe said if we succeed in buying the company, he’d buy the OTC [over-the counter medicines] part because he didn’t understand pharmacare.”

Weinstein said Joffe implied that he wanted to reduce costs “suggesting that he would be firing people… and increasing unemployment”. Weinstein said Joffe had been texting messages to him for several weeks suggesting that they meet to discuss the situation.

Business Report was unable to get comment from Joffe about the meeting with Weinstein but sources close to Bidvest said he was likely to be very concerned about the comment on job cuts as Bidvest had a history of growing jobs.

Weinstein’s revelations about the meeting with Joffe is the latest salvo in a corporate battle that is becoming increasingly fractious as the crucial December 18 deadline looms.

Earlier in the day Bidvest launched a high court application to have CFR’s bid declared invalid on the grounds that it was unlawful as it contravened the Companies Act. Bidvest alleges that Adcock’s board has already authorised the provision of financial assistance to CFR to enable it to pay Adcock shareholders for their shares.

In a statement issued yesterday Bidvest said: “The scheme documents record that CFR’s payment to Adcock shareholders will be funded from a $600 million (about R6 billion) bridging loan granted by a consortium of foreign banks (the lenders). However Bidvest contends that CFR, as presently constituted, does not have the means to raise the loan or to repay the lenders and that in order to raise and meet the cover requirements of the loan, CFR has to obtain a guarantee from Adcock in favour of the lenders.

“Without the security of the Adcock guarantee, backed by Adcock’s assets, revenues and financial profile, it appears that the lenders would not agree to the loan and CFR would be unable to fund the acquisition of the Adcock shares.”

In terms of section 44 of the Companies Act shareholders of a company must give authorisation for the provision of any financial assistance by the company.

Weinstein rejected Bidvest’s allegations, describing them as “totally incorrect”. He said CFR’s team had been looking at the transaction for eight months, including the funding proposal, and “we have the best legal advisers to ensure that it is fully compliant”.

He dismissed the legal challenge as “just another tactic wanting to delay and extract value in an obscure way”.

In turn Weinstein said his team was evaluating the legality of the offer made by Bidvest on Monday, which is pitched at R70 a share for a non-controlling 34.5 percent stake in Adcock. He was also considering launching a formal complaint about the “destructive tactics being used by Joffe”.

Bidvest has stated that it had been forced to pursue this particular course of action because of the hostility of the Adcock board to its efforts to acquire the company.

Weinstein said he remained convinced that CFR’s offer was the best one for Adcock shareholders and for South Africa as it would boost production and jobs in the country. Bidvest was trying to gain control of Adcock “through the back door”, he said. “Brian Joffe does not seem the sort of person to spend R4 billion on a whim, he’s not being open with shareholders,” Weinstein said.

Yesterday analysts were uncertain about the likely outcome of the battle for control of Adcock but noted that whatever happened Adcock shareholders were likely to be better off than they had been ahead of Bidvest’s initial offer in March.

“Joffe seems to have the advantage because he’s on home ground and he only has to get support from 25 percent of Adcock shareholders but CFR has sold a tantalising story,” remarked one analyst.

Yesterday almost 1 million Adcock shares were traded and the price fell 40c to close at R70.01. Bidvest fell 2.24 percent to R251.42. - Business Report


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