South Africa's Bidvest attempts to torpedo $1.2 billion Adcock takeover

JOHANNESBURG Mon Dec 2, 2013 4:29pm EST

JOHANNESBURG (Reuters) - A Chilean group's $1.2 billion bid for South African drugmaker Adcock Ingram (AIPJ.J) was challenged on two fronts on Monday, as a group led by Bidvest (BVTJ.J) sought nearly a third of Adcock's shares and launched a court action against the bid.

Bidvest had failed in an attempt to buy control of the nation's No. 2 drug firm in March and its new offer would give it a holding big enough to torpedo the rare Chile-South Africa tie-up - and possibly launch a fresh attempt at gaining control of the underperforming company.

Responding to CFR Pharmaceuticals' (CFRJ.J) bid, which was formally launched last month, Bidvest teamed up with black investment group Community Investment Holdings (CIH) to offer 70 rand per share to raise its stake to as much as 34.5 percent of Adcock, for nearly 4 billion rand ($393 million).

Bidvest already owns 4 percent of Adcock.

The two, which if successful would emerge with a holding of just below the 35 percent mark that would trigger a mandatory offer to minorities, also launched a lawsuit to challenge the legal and regulatory compliance of CFR's bid.

"We believe that the consortium has the credentials to add value to Adcock, something which is clearly required," Bidvest founder and Chief Executive Brian Joffe said in a statement.

Adcock had rejected Bidvest's previous offer for a 60 percent stake as "opportunistic."

Adcock, which has been hit by slow sales and runs behind domestic rival Aspen Pharmacare's (APNJ.J) push into overseas markets, has said the CFR deal is vital to its survival.

Later on Monday, CFR defended its bid as superior to Bidvest's.

"They are very different bids," CFR Chief Executive Alejandro Weinstein said in a statement.

"Our bid is for all of Adcock's shareholders and theirs is not; our bid is higher and allows all shareholders to benefit from the upside CFR provides Adcock; and our bid doesn't imply laying off personnel to lower costs, rather it solves Adcock's underlying problems," he added.

CFR has said the acquisition would create an emerging markets pharmaceutical powerhouse with a presence in 23 countries. Under the CFR offer, Adcock shareholders could receive as much as 47.29 rand per share and up to 15.44 new CFR shares per Adcock share.

The cash portion would represent nearly 8.1 billion rand in direct foreign investment into Africa's largest economy, a positive for the rand currency. CFR said it believed its offer was the best for the future of the company.

"The fact that there are other interested parties in Adcock shows that this is an attractive opportunity for CFR and that we will continue to move forward with the negotiations," said Weinstein.

THANKS BUT NO THANKS

Some Adcock shareholders were not won over by Bidvest.

"It's clever deal-making by Brian Joffe but at 70 rand a share for a 34.5 percent stake, thanks but no thanks," said Jean Pierre Vester, a fund manager at Johannesburg-based 360ne Asset Management, which has a 1.8 percent stake in Adcock and has pledged to back the CFR offer.

Another shareholder queried the industrial merits of Bidvest's move. "I don't see the synergistic benefits and value-enhancing elements we saw in the CFR deal," said the shareholder, who declined to be identified but said his fund would vote in favor of the CFR deal.

Yet Adcock's top shareholder, state-owned Public Investment Corp (PIC), has concerns about Adcock passing into foreign hands and about the share portion of the deal, a source familiar with the fund's thinking has said.

PIC, which manages pensions for state employees, is also top shareholder in Bidvest, according to Thomson Reuters data.

Bidvest's offer opens immediately. Shares in Adcock closed 0.5 percent higher at 70.41 rand, outperforming a 0.7 percent decline in the JSE All-share index .JALSH.

Sometimes called "the General Electric (GE.N) of South Africa" because of its diverse operations, Bidvest has businesses in freight, banking and food services and operates in Europe, Asia, Australia and southern Africa.

The son of Lithuanian immigrants, Joffe has a reputation as a cost-cutter and for buying underperforming companies that can benefit from Bidvest's distribution network and customer base.

Bidvest did not elaborate on the content of its lawsuit over the CFR offer, saying only that it would challenge compliance with legal and regulatory aspects of the transaction.

At least one other Adcock shareholder has filed a complaint against the drugmaker with the Johannesburg bourse, saying it had mislead investors about the level of backing for CFR's bid.

To go through, CFR's deal requires approval from holders of 75 percent of Adcock shares at a meeting on December 18, so if the Bidvest offer is successful it would be enough to vote the CFR deal down and, if it is not, Bidvest could sell them back.

Adcock said in a statement it was considering its position regarding Bidvest's new offer and the lawsuit.

($1 = 10.1666 South African rand)

(Additional reporting by Anthony Esposito in Santiago; editing by David Dolan, David Holmes and Matthew Lewis)

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