* Acrimonious deal pits state fund against Chile's CFR
* Deal opponents own at least 29 pct of Adcock
* $1.2 offer needs backing from 75 pct of shareholders (Recasts, adds comment and background)
By David Dolan
JOHANNESBURG, Dec 24 South Africa's state pension fund has increased its stake in Adcock Ingram to over 22 percent, putting the asset manager in a strong position to block a $1.2 billion takeover of the drugmaker by Chile's CFR Pharmaceuticals.
CFR revealed plans in July for a cash and shares bid for over-the-counter drugmaker Adcock, a deal that could mean foreign ownership of a key player in government plans to overhaul healthcare in South Africa.
CFR's bid has triggered a fierce battle for control of the South African company which has been investing in new factories and improving its supply chain but still struggles in overseas markets, particularly the rest of Africa.
State-owned Public Investment Corporation (PIC) has rejected CFR's bid and said it did not want CFR shares. A local conglomerate Bidvest Holdings has weighed in with a counter offer in cash for a little over a third of Adcock.
"People see value in Adcock and that is why there is so much interest in the company," said Abri du Plessis, chief investment officer at Gryphon Asset Management in Cape Town.
"Its earnings should rise quite dramatically if its restructuring starts to pay off."
In the latest twist, PIC has increased its stake to 22.373 percent, Adcock said in a regulatory filing on Tuesday. The state pension fund previously owned around 19 percent.
PIC's increased stake makes it more likely CFR's bid will fail since it requires backing by shareholders holding 75 percent of Adcock. Together the PIC and Bidvest now hold at least 29 percent.
Bidvest, with operations spanning car sales to catering, is run by founder Brian Joffe, one of South Africa's most high profile businessmen. The son of Lithuanian immigrants, the 66-year-old has a history of buying up underperforming companies and turning them around partly by cutting costs.
Joffe has said he is interested in Adcock's painkillers and other over-the-counter medicines. The PIC is also the top shareholder in Bidvest, leading to some speculation the fund is involved in Joffe's counter offer, something he has denied.
CFR Chief Executive Alejandro Weinstein has accused the PIC of protectionism and of sending mixed and confusing messages.
CFR executives have also sparred with Joffe. The Bidvest founder has launched a legal challenge against CFR, claiming funding aspects of the planned takeover violate South African law, which the Chilean firm has denied.
CFR's Weinstein, in a radio interview, has told Joffe to "put up or shut up for 100 percent of the company."
CFR this month sweetened its cash and share offer by 1.6 percent in an attempt to win over the PIC. The deal values Adcock at 74.50 rand, based on a value of 2.334 rand per new CFR shares.
Bidvest has offered 70 rand in cash for a little over a third of Adcock.
The PIC, which manages more than 1.4 trillion rand in government employee pension money, has argued that while CFR shares are fully valued, Adcock's have the potential to rise substantially through improved management.
PIC Chief Executive Elias Masilela has also expressed 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.
Shareholders are due to vote on the CFR deal some time next month.
Adcock shares were down 1 percent at 71.06 rand, compared with Bidvest's offer price of 70 rand and CFR's offer of 74.50 rand. ($1 = 10.3098 South African rand) (Additional reporting by Ed Stoddard and Jane Merriman)