Progress in CFR, Adcock Ingram merger proposition

CFR Pharmaceuticals of Chile continues to make good progress with its plans to acquire Adcock Ingram for R12.6 billion, said the parties to the proposed transaction yesterday.

If it goes through the transaction will see CFR acquire 100% of Adcock’s ordinary shares, excluding the shares held by Adcock’s BBBEE strategic partners, staff trust and treasury shares.

Yesterday’s announcement reiterated that “If implemented, the combination of CFR and Adcock Ingram will create a uniquely diversified emerging markets pharmaceutical leader, with a presence in 23 countries, more than 10 000 employees and targeting more than two billion people across the high growth markets of Latin America, Africa, South East Asia and India”.

Khotso Mokhele, Chairman of Adcock Ingram, said “The support received to date from shareholders, our BEE and multinational partners, as well as from the senior government representatives we have engaged, highlights the value they see in the combination”.

Added Mokhele “If implemented, this landmark transaction will represent one of the largest foreign direct investments in South Africa and will not only benefit our shareholders, but also our employees, customers and  ultimately patients and South Africa at large.”

The parties announced that shareholders representing approximately 45% of the total issued share capital of Adcock have pledged support for the transaction by providing either irrevocable commitments to vote or letters of support in favour of the scheme.

The parties said “This is a high level of support given the fragmented nature of the Company’s shareholder base, and only a limited number of requested shareholder undertakings are still to be received”.

The announcement said whilst the Bophelo Scheme Shares (BBBEE and staff holdings) are not being acquired by CFR, Adcock Ingram’s strategic BEE shareholders and its BEE staff trust have entered into agreements with CFR to ensure the retention of their ownership interests in Adcock Ingram post implementation of the potential offer, and have also provided irrevocable commitments to vote in favour of the transaction.

“CFR has also reached agreement with the Swiss-based multinational supplier, Baxter Healthcare SA. Baxter has consented to the change in shareholding and has agreed to maintain its existing licensing, distribution and supply arrangements with Adcock Ingram’s Hospital Products Division. Similarly, CFR has concluded  final agreement with Adcock’s Indian joint venture partner, Medreich Limited, which has consented to the change in shareholding in respect of the joint venture agreement governing Adcock Ingram India”.

CFR’s shareholders in Chile have authorised that the company issues the necessary CFR shares to Adcock’s ordinary shareholders. “This is a significant milestone, which begins CFR’s US$750m equity capital increase process, subject to Chilean regulatory approvals”.

CFR’s CEO Alejandro Weinstein said “The rationale underpinning the proposed combination remains as compelling as ever and we are delighted that this is being increasingly recognised by shareholders”.

Through the proposed combination, South Africa will have a major stake in, and play an important role in the development of a leading world-class pan-emerging markets pharmaceuticals business.  Additionally, with planned dual listings in Santiago and Johannesburg, South Africans will also be able to share both directly and indirectly in the resulting benefits of the proposed combination of two great companies”.

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