Heavy Adcock trade suggests third player

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Johannesburg - The second day of heavy trading in Adcock Ingram shares has sparked speculation that an unidentified party is attempting to build up a stake in a bid to influence the outcome of the battle between CFR Pharmaceuticals and Bidvest. Yesterday 2 947 746 shares traded at just over R70. On Wednesday, a similar number traded also at over R70.

Both CFR and Bidvest have denied that they are buying shares in the market. Private equity firm Actis, which was the third-known entity to make an offer for Adcock, told Business Report earlier that it would not comment on the transaction.

The spike in trading volumes follows an offer launched by Bidvest on Monday for a 34.5 percent stake at R70 a share. The offer, which is on a first-come-first-served basis, was expected to generate considerable volumes of trade in Bidvest’s favour.

However, on Wednesday Bidvest chief executive Brian Joffe told Business Report that none of the shares being traded on the market were going to Bidvest. One analyst said this raised the possibility that either Actis was trying to make a play or that an unknown entity was building up a stake in the hope of Bidvest or CFR lifting their offer price.

Meanwhile, yesterday the Public Investment Corporation (PIC) refused to comment on reports carried by Bloomberg that it would support an all-cash offer of R74 a share for 100 percent of Adcock. The PIC controls an effective 19 percent of Adcock and is regarded as the key player in the bid for control. It has indicated that it will not support the CFR offer as it is currently structured.

The CFR offer needs the backing of 75 percent of the Adcock shareholders present and able to vote at the shareholders’ meeting on December 18. If CFR is unable to make the changes necessary to accommodate the PIC, it is unlikely to secure the deal, particularly as Bidvest is known to have built up a 5 percent stake in Adcock.

Analysts said yesterday that it was highly unlikely that a demand for an all-cash offer of R74 per Adcock share could be met by CFR. The current offer, which comprises a mix of cash and shares, has already put the Chilean company under considerable funding pressure. “It is unlikely that CFR’s balance sheet could stretch to a R13 billion cash deal,” an analyst said.

There are signs that some institutional investors are becoming concerned that Bidvest’s latest partial offer might be successful in scuppering the CFR bid and that the Adcock’s share price will slump back to around R55 after the December 18 meeting. The “fair value” price of Adcock is estimated to be around R55 a share, which is the level at which it was trading in March ahead of the initial move by Bidvest.

“At this stage many Adcock shareholders are trying to work out whether they should hold onto the shares in the hope of an improved offer or in the hope that CFR is successful, but they also realise both of these options might fail. If that failure becomes apparent then there will be a rush to take up the R70 Bidvest offer before it is too late,” a trader said. - Business Report

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