Adcock rejects “opportunistic” Bidvest offer

Dr Khotso Mokhele, the chairperson of JSE listed pharmaceutical group Adcock Ingram and his board,responded to Bidvest offer to buy 60% of Adcock. The response is styled to dismiss Bidvest move, valued around the R6.2bn mark, as opportunistic, predatory and unfriendly to Adcock’s BBBEE structures. Knowing the tenacity of the man at the top of Bidvest, the super entrepreneur Brian Joffe, this may be only the beginning of an interesting boardroom battle. Watch this space!

 Here follows the unedited version of Mokhele’s statement.

 Statement by Dr Khotso Mokhele, Chairman of Adcock Ingram’s Board of Directors and Independent Board, regarding the Independent Board’s response to the Bidvest Letter

This afternoon, the Independent Board of Adcock Ingram issued a statement via the JSE’s Stock Exchange News Service (SENS) in response to the unsolicited proposal from Bidvest to acquire a 60% stake in Adcock Ingram.

Having reviewed the Bidvest Letter, the Independent Board, together with its advisers, consulted with senior counsel and the Takeover Regulation Panel, and engaged with Adcock Ingram shareholders including our BEE partners who together represent almost two thirds of the shares in issue. The Independent Board has fundamental legal and material prudential concerns with the Bidvest Letter and the Independent Board will not propose a scheme of arrangement to implement the proposal, as set out in the Bidvest Letter.

The Bidvest Letter does not constitute a firm intention to make an offer in terms of the Companies Act. Only the Board of Directors of a company can propose a scheme of arrangement between the company and its shareholders, and neither the Adcock Ingram Board nor the Independent Board was approached by Bidvest, prior to submission of the Bidvest Letter, to do so. What this means is that the Bidvest Letter is currently nothing more than a non-binding proposal. This is cause for concern for the Independent Board as Bidvest’s actions have created expectations in the market regarding the likelihood of a transaction being concluded.

In addition, the Independent Board has material prudential concerns with the Bidvest letter and the resultant potential prejudicial impact on Adcock Ingram shareholders. In particular, the Independent Board is concerned about the high level of conditionality, including “walk-away” rights, the absence of comparable offers for two of our other key stakeholders, namely our BEE partners and employees, who are participants in our group share incentive scheme.

The Bidvest Letter also fails to address the position of the remaining minority shareholders post implementation of such a transaction. Bidvest has provided no insight into the strategic rationale for its proposal and the potential benefits for Adcock Ingram and its remaining minority shareholders in a Bidvest-controlled Adcock Ingram. This is particularly relevant given that Adcock Ingram is making good progress in executing its medium-term strategic plans.

Adcock Ingram has recently completed a substantial investment programme to upgrade its manufacturing facilities and distribution infrastructure to world-class standards. The company has won tenders across the business, including a significant slice of the Government’s 2012 ARV tender. Adcock Ingram has reformulated certain products to reduce cost, complexity and regulatory risk, and also has a robust new product pipeline, while portfolio acquisitions have resulted in new product introductions. Adcock Ingram has also grown its pipeline and presence outside South Africa, with successfully completed acquisitions in both Ghana and India. Consequently, the Independent Board recognises that the timing of Bidvest’s approach appears to be opportunistic.

Shareholders should note that Adcock Ingram’s Board will consider any proposal, from any quarter, which is proposed in good faith and which could promote the interests of Adcock Ingram and create value for shareholders, and will keep an open mind regarding a revised proposal from Bidvest that addresses the Independent Board’s concerns.

I know the people of Adcock Ingram feel great pride in the work they do in providing world class health-care to patients and leading products to our customers throughout the continent.  Their commitment to this work, and to delivering for all our stakeholders, remains stronger than ever.

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