January 31, 2014 / 11:15 AM / 4 years ago

South Africa's Bidvest ups Adcock stake to block rival $1.2 billion bid

JOHANNESBURG (Reuters) - South Africa’s Bidvest (BVTJ.J) has raised its stake in drugmaker Adcock Ingram (AIPJ.J) to more than 34 percent, enough to block a rival $1.2 billion bid and prompt Adcock to seek urgent talks with its Chilean suitor.

Bidvest’s move - announced just hours before the start of Adcock’s annual general meeting - is likely to end months of wrangling with Santiago-based CFR Pharmaceuticals CFR.SN over control of South Africa’s second-largest drugmaker.

Bidvest Chief Executive Brian Joffe wants Adcock’s portfolio of over-the-counter medicines and a chance to turn around another underperforming firm.

CFR is looking to build an emerging markets pharmaceutical powerhouse by adding fast-growing Africa to its operations in Latin America and Asia.

It has bid 12.8 billion rand ($1.2 billion) in cash and shares for the drugmaker, an offer backed by Adcock’s board but requiring approval of shareholders owning 75 percent of the company.

“It’s over,” Joffe told Reuters, adding that Bidvest had bought 34.5 percent of Adcock from shareholders for 4 billion rand in cash.

Adcock said its board “cannot envisage a realistic basis” for approving the deal with CFR and that it would hold urgent talks with its suitor to discuss the fate of the Chile-South Africa tie-up.

Adcock, which has suffered from weak sales and an over-reliance on its home market, also on Friday warned that first-half profit would likely fall at least 20 percent.

“The CFR bid is not going to get approval. It has two options: walk away or go hostile,” Alec Abraham, an analyst at Afrifocus Securities, said.

“But if CFR goes hostile, it would be difficult for it to bed down the deal and get synergies out when working with a hostile shareholder. So my guess is CFR will walk away.”

CFR officials could not immediately be reached for comment.

Adcock shares were down 3.05 percent at 67.86 rand at 1428 GMT. That was well below CFR’s bid of 74.50 rand worth of cash an its own shares, an indication that investors think the bid is likely to fail.


The 66-year-old Joffe, who has built a reputation as a canny dealmaker, was rebuffed by Adcock last March when he tried to buy a controlling stake, aiming to add painkillers and prescription medicine to Bidvest’s more than 300 businesses ranging from freight and auto sales to frozen food.

Bidvest bought the bulk of a record 39 million Adcock shares traded on Thursday, reaching its target three days before the offer was due to close next Tuesday.

It is not clear whether Bidvest will raise its stake further. Joffe is widely expected to make a full buyout offer, given that he previously tried and failed to acquire control.

    He declined to say if Bidvest would attempt to buy a majority stake in Adcock, saying he was happy the increased stake would allow him to have a say in where company is headed.

    “We should now have some strategic input into the company. We are optimistic about the prospects of the company,” Joffe said on the sidelines of Adcock’s annual general meeting.

    If his holding reaches 35 percent, he would be forced to make an offer to minority shareholders, according to Johannesburg Stock Exchange rules.

    Adcock shareholders are due to vote on the CFR deal next month.

    In addition to Joffe, South Africa’s state-owned Public Investment Corporation (PIC) has said it opposes the CFR offer.

    The PIC, which owns 22 percent of Adcock, has said it doesn’t want CFR shares because it wants to benefit directly from improvements at Adcock.

    The PIC is also the top shareholder in Bidvest, leading to some speculation Joffe is working with the state pension fund to thwart CFR, something he has denied.

    Adcock has suffered from lackluster sales, inefficient distribution and an over-reliance on its home market.

    Some analysts say it would make a good fit for Joffe, whose reputation for turning around underperforming companies stems from a focus on cash flow, capital allocation and returns.

    Writing by David Dolan; Editing by Mark Potter and Erica Billingham

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