Bidvest waits after PIC rejects CFR Pharmaceuticals’ offer for Adcock

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Johannesburg - Bidvest chief executive Brian Joffe was waiting to see how Adcock Ingram responded to the Public Investment Corporation’s (PIC’s) thumbs down for a Chilean buyout offer before making a decision about the pharmaceutical company, he said yesterday.

In a statement sent to Bloomberg yesterday, the PIC said it had considered CFR Pharmaceuticals’ buyout offer based on current terms and available information. “The PIC management and investment committee has come to the unanimous decision that it is not in the best interest of our shareholding to support the CFR [proposal] in its current form.”

The PIC, which holds 18 percent of Adcock, said this was based on a long-term view of its investment in the company. It also noted that the CFR offer was non-binding and its terms were not only uncertain but could not be considered as final.

Bidvest made an unsolicited offer at around R63 for Adcock in March.

Neither CFR nor Adcock had responded to the PIC statement by close of business yesterday.

Analysts said the Chilean drug maker had been unable to make a binding offer because of constraints it faced regarding the issuing of additional shares in Chile.

Without PIC support the offer is unlikely to secure the 75 percent shareholder approval needed to finalise the deal. Bidvest holds about 3 percent of Adcock and would also vote against the transaction.

Furthermore, it is unclear how Foord Asset Management, another significant shareholder with approximately 10 percent of Adcock, would vote.

Last week, CFR and Adcock issued a statement and said they had received support from 45 percent of the shareholders. The statement said that part of this support was in the form of irrevocable undertakings.

The PIC’s statement does not rule out reaching some agreement with CFR although the state pension fund manager has previously indicated that it would prefer Adcock to remain under South African control. However, the PIC has also indicated that it might consider an all-cash offer for Adcock.

Yesterday’s statement caused jitters in the market, prompting the share price to drop 4.56 percent to close at R68.40 on a day when the all share index leapt nearly 1 percent. This compares with last Friday’s closing price of R72.40, which was reached at a time when traders assumed the CFR deal would be successful.

CFR is offering the equivalent of R73.51 a share for Adcock. It will be paid in a mix of cash, of at least R47.29, and CFR shares. If the deal goes ahead, CFR intends to obtain a secondary listing on the JSE.

Alec Abraham, an analyst at Afrifocus Securities, said his “fair value” for Adcock as it stood and without the CFR deal was R55.25. He acknowledged that the offer’s flaw was that it was non-binding but said it would be a “dark day” for shareholders if the deal was scuppered. “It will generate a lot of volatility in the share, which is good for traders but investors could get caught out.”

He supported the deal because of the potential it offered to extract more profit from Adcock’s assets. “Without CFR, what’s the alternative for Adcock?” he queried. - Business Report


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