Two-way battle for Adcock hots up

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A pharmacist counts pills in a pharmacy.

Johannesburg - More than twice the average daily volume of Adcock Ingram shares were traded yesterday, indicating that Bidvest’s latest offer of R70 a share might be sufficient to scupper the bid by Chile-based CFR Pharmaceuticals.

The CFR bid is valued at R73.51 and is a mix of cash – to a maximum of R47 per Adcock share – and CFR shares.

The uncertainty surrounding CFR’s bid will be heightened by the legal action against CFR and Adcock, which is expected to be launched by Bidvest today.

Although Bidvest does not aim to acquire control of Adcock, it has emerged that Baxter, with which Adcock has a number of extremely valuable licensing arrangements, had indicated it would be happy to work with Bidvest.

Yesterday Adcock issued a Stock Exchange News Service (Sens) statement referring to Bidvest’s R70-a-share offer and the “contemplated” legal action, stating it did not have details of the planned action.

Part of the legal action is expected to relate to a dispute over who is entitled to vote at the Adcock shareholders’ meeting on December 18. The meeting will decide on the CFR offer.

However, it is also possible that the legal action will relate to the legitimacy of the scheme.

In a Sens announcement issued by Adcock last Friday, the firm referred to additional transaction-related documents that had been made available for inspection by Adcock, following a request by an Adcock shareholder.

The Sens statement noted that some of the documents, which relate to promissory notes, powers of attorney and pledges, were in Spanish – suggesting that they are CFR documents.

Parts of these documents had been redacted, according to Adcock’s Sens statement.

By the close of trade yesterday about 1.2 million Adcock shares had been traded, compared with a daily average of 580 000.

The share closed at R70.41, which was 0.51 percent better than Friday’s close but off the intraday high of R71.

On a daily basis it is impossible to know how many of the shares traded on the market were bought in terms of the Bidvest offer or whether any shares were sold to Bidvest off the market.

Bidvest is only required to disclose its holding of Adcock shares each time it acquires an additional 3 percent stake.

This uncertainty makes it difficult for Adcock shareholders to adopt a wait-and-see response to Bidvest’s offer, which is on a first-come-first-served basis.

Bidvest’s offer is for a non-controlling 34.5 percent of Adcock and once it has reached this level, its offer closes.

CFR did not issue a formal response to Bidvest’s offer but a spokesman for CFR said the Chilean company remained convinced that its offer for 100 percent of Adcock was the “superior solution for Adcock’s current position in terms of developing markets”.

He described the Bidvest offer as “not very equitable” because it was not made to all Adcock shareholders and noted that if the CFR bid fell away, the Adcock share price would be significantly weaker.

Analysts agree that as a trade buyer, CFR offers attractive growth potential for Adcock.

However, they note that the CFR management is little known in South Africa and that after the transaction CFR will be highly geared. - Business Report

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