Johannesburg - Alejandro Weinstein, the chief executive of CFR Pharmaceuticals, said he was shocked when he read last week that the Public Investment Corporation (PIC) would not support the Chile-based pharmaceutical company’s bid for Adcock Ingram “in its current form”.
“I have met with the PIC three times and have explained the transaction to them; I was informed of its decision through the media… I was shocked,” said Weinstein, who is visiting South Africa this week and is hoping to set up a meeting to see if there is a way around the impasse.
“On the basis of the economics and finances of our offer, I cannot understand how the PIC made its decision. We have a compelling offer.”
Weinstein said he had worked on the deal for eight months and was convinced of its benefits. “I don’t see an alternative for shareholders as good as this.” He said the transaction would see CFR moving production to South Africa, creating employment and developing export markets. He said it was unlikely a bid from a private equity player or somebody outside the industry would be able to generate the sort of long-term value being promised by CFR.
Asked if there was any room to increase the R73.51 offer being made by CFR or to allow the PIC to retain some equity stake in the South African business, Weinstein would only say that the structure of the offer was flexible in that it involved a variable amount of cash and CFR shares. With regard to pricing, he said the offer was attractive and CFR “was close to the maximum” it could offer “especially as we don’t yet know the results of Adcock”, he said, referring to the results for the six months to September.
CFR had only presented Adcock shareholders with a potential, rather than a firm, offer because it needed to resolve critical issues before it could make a binding offer. These involved securing agreements with a number of parties including Baxter, which is a major supplier to Adcock, Medrite, an Indian company with which Adcock has a joint venture, Merck Sharp & Dome, which also supplies Adcock, and the company’s black economic empowerment partners.
Weinstein said these issues, which he described as potential poison pills, had been resolved by CFR and he believed it would be difficult for anybody else to step in to do a deal.
He dismissed concerns that CFR was not well known and that as a small player it might not have the experience and resources to realise Adcock’s potential as well as the promised benefits of the transaction. “CFR is well known by the big investment institutions worldwide… our bond issue last year was 11 times oversubscribed. We have the capacity to do what’s being promised.” Weinstein said in recent years CFR had been recording the same sort of growth rates as Aspen.
CFR’s bid for Adcock is part of its plan to become a major player in emerging markets where demand for pharmaceuticals is enjoying far stronger rates of growth than developed markets. It wants to create a leading diversified emerging markets pharmaceuticals company treating over 2 billion patients in Africa, Latin America, south-east Asia and India.
On Friday, Adcock closed at R68.13, a drop of 6 percent over seven days, most of which occurred on the day of the PIC’s rejection of the CFR offer. - Business Report