The competition authorities have ordered Bidvest to refrain from cutting jobs at Adcock Ingram, dealing a blow to the conglomerate’s plan to turn around the ailing drug maker in which it holds a stake of more than a third.
Adcock is trailing rivals such as Aspen Pharmacare as it grapples with slowing sales, over-reliance on a heavily regulated home market and factories that are running below their capacity.
Adcock is in the middle of a turnaround plan led by Bidvest, which took a 34.5 percent stake in the drug maker in February and torpedoed a R13 billion takeover bid by Chile’s CFR Pharmaceuticals.
“The tribunal decided to approve the proposed transaction subject to the condition that Adcock will not retrench any employees for a period of one year from date of approval of this transaction,” the Competition Tribunal said yesterday, referring to the purchase of the controlling stake.
Bidvest had planned to cut at least 51 jobs but later informed the watchdog that the number could be more.
Adcock chief executive Kevin Wakeford, appointed weeks after CFR dropped its bid, also wants to reorganise the company to match the decentralised model of Bidvest, which runs more than 300 businesses.
Shareholders are expecting a lot from Bidvest because some felt robbed of an easy payout when it sank CFR’s cash-and-shares bid that would have also pushed Adcock into fast-growing markets in Latin America and south-east Asia.
Bidvest Group is considering increasing its stake in Adcock Ingram to above 50 percent, according to a legal document from the Competition Tribunal obtained by Reuters.
“The Bidvest bid has involved two stages. The second stage is to acquire further shares beyond the 34.5 percent, which presumably, depending on the take-up of the offer, would take Bidvest’s holding to above 50 percent,” it said.
Earlier this week Adcock flagged a heavy nine-month loss and gave investors little comfort about when it would start turning a profit, citing rising operating costs as some of factories ran at low levels of capacity.
Adcock’s profits have fallen by more than 22 percent in the past five years, while its closest rival, Aspen Pharmacare, has booked a nearly sixfold increase thanks to an aggressive overseas expansion.
Adcock shares have fallen nearly 19 percent over the past two years. Aspen shares have more than doubled in that time. Adcock rose 2.06 percent to R48.99 yesterday.