Major Adcock supplier ready for CFR control

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Johannesburg - Baxter, which is a major supplier to Adcock Ingram, confirmed yesterday that it had entered into a number of agreements with CFR Pharmaceuticals relating to CFR’s bid to acquire control of Adcock.

In response to questions from Business Report, Deborah Spark, Baxter’s director of external communications, said the US-based provider of medical devices, pharmaceuticals and biotechnology, “among other things, unconditionally waives its right to terminate the agreements Baxter has with Adcock Ingram upon a change of control event”.

“Adcock Ingram is Baxter’s main business partner in South Africa and, as such, Baxter is committed to dealing with the company that Adcock Ingram’s board of directors has selected as the preferred offeror in the process initiated by them earlier this year.”

Spark also said: “As part of the process initiated by Adcock Ingram’s board of directors, Baxter has had meetings with Bidvest but has no formal relationship or agreement with Bidvest.”

Bidvest, which has made a rival offer for up to 34.5 percent of Adcock, announced yesterday that Richard de Chastelain would become a non-executive director with a view to developing Bidvest’s pharmaceutical interests. Chastelain will retire as head of Bayer Healthcare South Africa next month.

There was reasonably strong trade in Adcock yesterday, with 1.6 million shares changing hands. The shares closed 15c weaker on the day at R71.

With less than 24 hours before Adcock shareholders have to submit their proxy votes, few analysts were prepared to commit to the likely outcome of what has been a hotly contested bid for control of one of South Africa’s oldest and largest pharmaceutical companies.

Yesterday a spokesman for CFR said the Chilean-based company was, in fact, considerably larger than Adcock.

Responding to comments by Bidvest chief executive Brian Joffe, which were carried in Business Report, the spokesman said CFR had annual revenue of $722 million (R7.49 billion) compared with Adcock’s $527m. CFR has a market capitalisation of $1.9bn against Adcock’s $1.2bn.

The CFR spokesman reiterated CFR’s approach to the position of the current Adcock management. He referred to comments by CFR chief executive Alejandro Weinstein that “everyone deserves a chance… but there’s no guarantee of jobs in the long term… it’s about performance”.

The transaction document sent to Adcock shareholders last month said: “CFR intends to retain Adcock Ingram’s existing senior management and that Adcock Ingram’s [chief executive] shall continue to manage Adcock Ingram’s and its group companies’ operations for Africa.”

The spokesman said this “intention” was in line with South Africa’s legal requirements and did not represent a job guarantee.

He added that if the transaction was successfully concluded, “management would come into the business from CFR”. Weinstein would assume overall responsibility for Adcock. “In terms of performance, everyone will be under the spotlight.”

One analyst said it was likely that CFR would retain the top management for at least a year until integration of the transaction had been completed. Asked to comment on the likely outcome of the bid, he said that at this stage only the Public Investment Corporation could know for certain.

“Whichever party emerges with control it will be good for Adcock as it means there’s a good chance of the business being re-energised.” - Business Report


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