Hostilities over Adcock intensify

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CFR Pharmaceuticals increased its cash and shares offer for Adcock Ingram to R74.50 a share after a Bloomberg story stating the PIC "is seeking an all-cash offer of as much as R74 a share". Photo: Reuters

Johannesburg - CFR Pharmaceuticals chief executive Alejandro Weinstein has appealed to the board of directors and the investment committee of the Public Investment Corporation (PIC) “to provide a single endorsed view that clarifies the PIC’s institutional position with respect to our offer [for Adcock Ingram] in the interests of transparency and clarity”.

The appeal was made in a statement issued yesterday in which CFR contended that the PIC’s “approach appears to be driven by protectionism”.

The statement followed a weekend of drama, which saw an outbreak of open hostility between CFR and the PIC, which is the largest single shareholder in Adcock.

The open hostility appears to have been prompted by the news that the PIC had rejected CFR’s last-minute increase in its offer for Adcock to R74.50 a share from R73.50. At the weekend CFR described its engagement with the PIC “as less than satisfactory”.

CFR’s response prompted a heated response from Daniel Matjila, the chief investment officer of the PIC, in which Matjila apparently referred to CFR’s negotiators as “liars”.

Matjila told the Business Times that, contrary to statements made by CFR, a possible offer of R74 a share by CFR had not been discussed with the PIC. “These guys are liars and have absolutely no credibility,” Matjila said.

In the statement released yesterday, Weinstein described Matjila’s remarks as disappointing. “Aspersions are now being cast on CFR’s standing, the virtue of its intentions and the quality of our company as an investment vehicle.”

He said that CFR had been welcomed by the South African government and key agencies, “which we have appreciated”, noting that engagements with the government had been conducted in an open, constructive and enthusiastic spirit.

“In stark contrast, our engagements with the PIC have been stilted and challenging. We have struggled to gain access to senior executives within the PIC in any meaningful way for reasons that are unclear and despite numerous attempts to do so.

“None of our engagements with the PIC have concluded satisfactorily and the messages we have received have been mixed and confusing.

“The impression created is that the criticisms levelled at our offer by the PIC have little to do with the commercial merits and are instead intended to allow a local buyer to succeed over a foreign buyer.”

The PIC could not be reached yesterday for further comment. The outbreak of hostilities followed CFR’s last-minute decision to increase the offer price and to postpone the meeting of Adcock shareholders – called to vote on the CFR offer – from tomorrow until an unspecified date at the end of next month.

The last-minute decision to alter the terms of the initial offer appears to have been prompted by the realisation that the PIC would not support the CFR offer. Given that the PIC accounts for about 20 percent of the Adcock vote, its decision not to support the CFR offer, combined with Bidvest’s approximate 7.5 percent stake, meant the offer would not secure the necessary level of shareholder approval.

One analyst remarked that the R1 a share increase in the offer was around the value of the final dividend that Adcock shares had missed out on because of the terms of the CFR offer. Those terms preclude Adcock from paying out dividends while the CFR deal is in place.

A spokesperson for CFR told Business Report that the Chilean firm had decided to increase its offer to R74.50 after a Bloomberg news story released early this month stated that the PIC “is seeking an all-cash offer of as much as R74 a share”.

Following news that the PIC had reject the R74.50 offer CFR issued a statement at the weekend noting: “The increased offer of R74.50 has not been tabled with the PIC, so how can the offer be turned down without first taking it to their investment committee when they have been quoted in the press as indicating they would consider R74 cash?

“The PIC supported Bidvest at below R65 a few months ago when the business performance was significantly better. How does R74.50 greatly undervalue Adcock?”

Bidvest’s latest offer of R70 a share in cash for 34.5 percent of Adcock remains open. Adcock gained 47c to R70.47 on Friday. - Business Report

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