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UPDATE 3-Bidvest asks S.Africa court to block CFR's $1.2 bln Adcock bid
December 3, 2013 / 2:26 PM / in 4 years

UPDATE 3-Bidvest asks S.Africa court to block CFR's $1.2 bln Adcock bid

* Bidvest alleges CFR’s plan to finance deal ‘unlawful’

* CFR says Bidvest claims ‘totally incorrect’ (Recasts, adds comment from Bidvest and CFR chief executives, adds detail)

By Tiisetso Motsoeneng

JOHANNESBURG, Dec 3 (Reuters) - Bidvest has asked a high court to block a $1.2 billion takeover bid for Adcock Ingram by Chilean firm CFR, intensifying a cross-border battle for South Africa’s second-largest drugmaker.

Bidvest founder and Chief Executive Brian Joffe, who has built a conglomerate with more than $15 billion in revenue by snapping up underperforming companies, has been trying since March to take control of Adcock and the bid from Santiago-based CFR Pharmaceuticals has complicated his plans.

Joffe went direct to Adcock shareholders on Monday with a cash offer aimed at raising Bidvest’s stake to over a third from 4 percent now. If it acquires more than 25 percent, it could block the CFR deal, which requires approval of shareholders holding 75 percent of the company.

In a summary of a court filing seen by Reuters on Tuesday, Bidvest argued that CFR needed a guarantee from Adcock to secure $600 million in funding for its takeover, and that the deal was “unlawful” under South Africa’s Companies Act because Adcock had agreed to provide financial assistance.

“Bidvest contends that CFR, as presently constituted, does not have the means to raise the loan or to repay the lenders,” the summary of the lawsuit said.

Bidvest said it would seek to postpone a Dec. 18 meeting in which Adcock shareholders are scheduled to vote on the CFR deal.

CFR’s Chief Executive Alejandro Weinstein shot back at Bidvest and Joffe on a conference call with reporters, saying the allegations were “totally incorrect” and that the offer was “fully compliant” with local regulations.

He said CFR was considering its own legal action against Bidvest.

“We have never encountered a situation like this,” Weinstein said, referring to his company’s history of mergers and acquisitions in about 20 countries, mostly in Latin America and Asia.

One analyst said it was common in takeovers for companies to use their target as a guarantee.

“Most leveraged buy-outs use the target company as security for the debt raised for acquisition,” said Kate Turner-Smith, an analyst at BPI Africa.

“The merged company will be responsible for that loan - not Adcock shareholders in isolation.”


Bidvest is offering 70 rand ($6.77) a share in cash.

Adcock’s board said on Tuesday it believed the CFR offer was still the best option for its shareholders.

CFR has said the South African acquisition would create an emerging markets pharmaceutical powerhouse with a presence in 23 countries.

Under CFR’s offer, Adcock shareholders could receive as much as 47.29 rand per share and up to 15.44 new CFR shares per Adcock share.

Shares in Adcock ended flat on Tuesday at 70.01 rand, almost in line with Bidvest’s offer.

One shareholder, who asked not to be identified, said Bidvest was not offering enough of a premium.

“There’s no way I would sell to Bidvest at 70 rand,” said the shareholder, who plans to back the CFR offer.

“Adcock has got a problem with its pipeline and weak management, which is an area where CFR is able to strengthen the company. To me, it’s clear there is a value proposition from CFR, but not from Bidvest at that current price.”


Adcock’s top shareholder, the 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.

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

Joffe told CNBC Africa he had not been in contact with the PIC over the deal.

“The PIC is very aloof in this particular matter. We haven’t had the opportunity of using Bidvest as a vehicle to be able to talk to them,” he said.

He also said Bidvest had acquired around 900,000 shares on Monday, or about 0.5 percent of Adcock’s outstanding shares, according to Reuters calculations.

If CFR were successful, the cash portion of the deal would represent nearly 8.1 billion rand in direct foreign investment into Africa’s largest economy, a positive for the currency .

But South Africa has a history of scuppering big cross-border deals and some analyst are concerned that a failure by CFR could reinforce a perception that Pretoria is lukewarm to foreign investment. ($1 = 10.3410 South African rand) (Writing and additional reporting by David Dolan; editing by Pascal Fletcher and Tom Pfeiffer)

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