* State fund wants to benefit from Adcock turnaround
* Opposition will likely derail rare Chile-S.Africa deal
* State fund says not opposed to foreign investment
* Adcock shares little changed at 71 rand
By Tiisetso Motsoeneng
JOHANNESBURG, Dec 20 South Africa's state
pension fund came out against a $1.2 billion bid for drugmaker
Adcock Ingram on Friday, almost certainly derailing the
offer from Chile's CFR Pharmaceuticals.
The state-run Public Investment Corporation (PIC), Adcock's
top shareholder, said it did not want to swap its Adcock stock
for that of Santiago-based CFR, saying more value could be had
from changes in Adcock's management.
Opposition from the PIC, which owns around 19 percent of
Adcock, is likely to sink the cash and shares deal that requires
approval from shareholders holding 75 percent of the target's
It also strengthens the hand of rival firm Bidvest,
which went straight to Adcock investors with an all-cash bid for
more than a third of the company.
"This deal is going nowhere. CFR should do itself a favour
and walk away," said one Adcock shareholder who spoke on the
condition of anonymity. "There's no way they would get 75
percent shareholder backing."
No one was immediately available for comment at CFR.
In a statement, PIC Chief Executive Elias Masilela said:
"We believe that CFR shares are fully valued, whilst Adcock
Ingram's share price has the potential to rise substantially in
value through better management."
Masilela also voiced concerns about investing in a
family-controlled business, as the combined Adcock and CFR would
be majority-owned by CFR's founding Weinstein family, which
currently owns 73 percent of the Chilean firm.
"Given our experience of corporate governance challenges
with some family-controlled businesses locally, we believe this
introduces risks to the investment, especially considering the
short listing history of CFR," he said.
Shares of Adcock were little changed at 71 rand at 1034 GMT,
closer to Bidvest's offer of 70 rand a share than CFR's 74.50
EMERGING MARKETS POWERHOUSE
Together the PIC and Bidvest hold at least 26 percent of
Adcock, enough to block the deal when shareholders vote on the
12.8 billion rand ($1.2 billion) takeover next month.
PIC said it believed more value could be extracted for
Adcock shareholders through changes in the way it is managed,
but gave no further detail.
CFR's effort to build an emerging-markets powerhouse with
operations in Latin America, Asia and Africa has been in doubt
since Bidvest recently increased its Adcock stake to 7 percent.
The PIC is also the top shareholder in Bidvest, leading to
some speculation the fund is behind Bidvest's counter offer,
something Bidvest Chief Executive Brian Joffe has denied.
Joffe has built Bidvest into a sprawling conglomerate with
interests in everything from car sales to catering by snapping
up underperforming companies, cutting costs and taking advantage
of his group's vast customer base.
CFR, which last week sweetened its offer by 1.6 percent in
an attempt to woo the PIC, has since accused the fund of
The PIC responded to that charge on Friday by saying it was
not opposed in principle to foreign direct investment (FDI).
"The PIC supports foreign direct investment in South Africa
as long as such FDI has predictable long-term benefits for the
South African economy," Masilela said, citing the fund's backing
of Wal-Mart's acquisition of retailer Massmart,
a deal approved in 2012.
South Africa needs foreign investment to create jobs and
help bolster weak economic growth, currently around 3 percent.
The official unemployment rate is around 25 percent.
However Pretoria has a record of scuppering cross-border
deals. Most recently it rejected a $385 million offer from South
Korea's KT Corp for 20 percent of fixed-line
operator Telkom SA, which the government sees as
critical in its plan to roll out internet service to the poor.