Adcock Ingram’s Chilean (CFR) dance gains momentum

The Chileans, CFR Pharmaceuticals, mean business in their pursuit for local pharmaceutical giant Adcock Ingram. CFR tabled a firm R12.6bn offer on Friday to buyout Adcock Ingram.

Many in the market will be wishing for a counter offer resulting from the fact that Adcock Ingram has attracted a couple of suitors in the recent past but chose to go with the Chilean dance.

The market will also be watching closely reaction by the South African government to the now firm proposition. This is after the Public Investment Corporation (PIC) signalled that it does not like the deal at least in its current terms. We have previously reported that the CFR proposition may face the kind of protest noise experienced when US retailer Walmart was going for Massmart.

The deal’s sponsors seem to know this and have dressed it accordingly.

In a joint CFR/Adcock announcement released on Friday it was announced that a firm offer is on the table and comes to show confidence that the proposition will secure the requisite shareholder.

The announcement noted that of the R12.6 billion consideration payable, up to R8.1 billion will be injected into the country by way of a cash settlement, and the balance will be settled in CFR shares. “The newly combined company will be listed on both the Santiago Stock Exchange and the JSE, thus enhancing South Africa’s reputation as a global investment destination.”

The announcement added that shareholders representing approximately 45% of the share capital of Adcock Ingram (excluding treasury shares) have pledged support for the transaction.  Visio Capital, Absa Asset Management, Stanlib Investment Management, Afena Capital, 36One Asset Management and Sanlam Asset Management are among the 29.3% of the shares eligible to vote at the general meetings that have irrevocably undertaken to vote in favour of the resolutions required to approve the scheme of arrangement. Holders of another 7.5% of the shares eligible to vote at the general meetings have provided letters of support.

Adcock Ingram chairperson Khotso Mokhele said “In line with our fiduciary duties, the Adcock Ingram Board and Independent Board has overseen a rigorous, eight month process where we have thoroughly evaluated all the options before us to ensure we maximise value for shareholders and all other stakeholders.”

We are unanimous in our view that CFR remains the most compelling option on all counts – from the offer price, strategic rationale and ability to execute, through to the creation of a unique emerging markets pharmaceuticals player.”

The combination with CFR makes an enormous amount of sense and we are pleased with the support we have received from a substantial number of our shareholders, including our BEE shareholders and key multinational partners. We appreciate the engagements with relevant senior South African government representatives, which have been positive and constructive.”

CFR Chief Executive Officer Alejandro Weinstein said said “We are delighted to announce a firm and binding offer for Adcock Ingram.  Together, we have the opportunity to create a world-class, pan-emerging markets pharmaceuticals business delivering a long-term future and significant benefits for all South African stakeholders.”

Indeed, the compelling rationale for the proposed combination has been accepted by the overwhelming majority of all stakeholders we have engaged with and this is reflected in the outstanding level of shareholder support received to date.  We look forward to confirming that support at the General Meeting next month to approve the combination.”

Mokhele added that “This presents a ‘win win’ for all stakeholders. This signature transaction will not only benefit our shareholders, but also our employees and customers, and ultimately patients and South Africa at large. It will  support our national strategic objectives in areas such as skills transfer, exports and jobs. It would implement much of what the National Development Plan argues is required for South Africa’s successful future.”


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