310114 Adcock Ingram chairman Khotso Mokhele at the company AGM in Midrand Johanneburg.photo by Simphiwe Mbokazi 453

Johannesburg - For three years, Adcock Ingram has not paid any short-term incentives because financial targets have not been met.

Analysts said yesterday that this fact justified the combined move by Bidvest and the Public Investment Corporation (PIC) to appoint four directors to the board of the drug maker.

“Adcock is facing cyclical problems because of the weak rand and poor consumer demand. But it also has management-related problems. For the past three years no one has achieved their financial targets, so appointing new board members is probably the right thing to do,” analyst Chris Logan told Business Report yesterday, noting that Bidvest was in the process of completing a due diligence on Adcock.

He said it was evident Bidvest was “in for the long haul” and the involvement of Brian Joffe, Bidvest’s chief executive, represented the best chance of realising Adcock’s potential.

Logan’s comments followed the latest outbreak of hostilities between Bidvest and Adcock, which has seen Adcock chairman Khotso Mokhele resign with immediate effect. His resignation followed demands contained in two letters – one from Bidvest and one from the PIC – that he resign from the Adcock board.

The letters also demanded that by Tuesday evening, Joffe, Lindsay Ralphs, Anna Mokgokong and Roshan Morar be appointed as directors.

In a Stock Exchange News Service (Sens) announcement released yesterday, Adcock said it had received the letters shortly before 4pm on Tuesday.

They had been sent in terms of section 61(3) of the Companies Act, which allowed shareholders to make “demands for substantially the same purposes” in relation to a call for the board to convene a shareholders’ meeting.

The letters pointed out that Bidvest held a 34.5 percent stake in Adcock and the PIC owned 21 percent.

The letters went on to state that if Adcock did not make the board changes, then the letters served as notice that Bidvest and the PIC were exercising their rights in terms of section 61(3) of the Companies Act and calling for Adcock to convene a meeting of shareholders. At that meeting, shareholders would be given an opportunity to vote on the removal of Mokhele and the appointment of Bidvest and PIC nominees.

The letters also stated that if the Adcock board did not call a meeting by March 4, Bidvest and the PIC would apply to court to ensure that the meeting was convened.

The Sens announcement said Adcock’s board had held an urgent meeting on Tuesday to consider the contents of the letters.

“The deadline stipulated by Bidvest and the PIC to respond to the letters did not allow adequate time for the Adcock Ingram board to properly consider the demands made or follow its own corporate governance processes regarding the appointment of directors,” it said.

Business Report was unable to locate a copy of Adcock’s memorandum of incorporation, but its annual report referred to the process of board appointments, which included evaluation by fellow directors before a recommendation on their election is made by the board to the shareholders.

In its Sens statement, Adcock said it intended to convene a shareholders’ meeting as requested by Bidvest and the PIC and the notice of the meeting would be sent out no later than March 4.

Adcock shares gained 2.84 percent to close at R58.25 yesterday. Bidvest fell 0.41 percent to close at R240. - Business Report