The BBBEE factor weighs in over Adcock Ingram race

The Bidvest Group threatens to spoil a Chilean party on South African soil with a counter bid to acquire about 35% of JSE listed pharmaceutical giant Adcock Ingram.

The unfolding of events in the race for Adcock Ingram resonates with our observations in previous reports. This race will have politics in it. The kind of politics which nearly scuppered the acquisition of local retailing firm Massmart by US giant Walmart. Broad Based Black Economic Empowerment (BBBEE) credentials are going to play a significant role in this race. It was always going to be a mistake to discount Bidvest from this race.
Bidvest revealed today a comeback into the race for Adcock Ingram when it was looking like Chilean firm CFR Pharmaceuticals was about to close its Adcock Ingram takeover proposition.
The Brian Joffe led investment holding giant Bidvest has comeback with a R70 per share offer for 34.5% of Adcock Ingram and a stronger black economic empowerment (BEE) angle. The Adcock Ingram board had previously attacked Bidvest initial offer as opportunist and lacking in the BEE area.

This time around Bidvest has teamed up with Community Investment Holdings (CIH), the Anna Mokgokong led BBBEE investment company.

Bidvest which currently owns about 4% Adcock Ingram shares said if the offer is accepted in full, the Consortium will hold 34.5% of the issued ordinary shares in Adcock. Adcock will maintain its primary listing on the JSE with shareholders having a substantial residual direct participation in the performance and dividends of Adcock going forward.
The Bidvest statement highlighted that CIH was founded by Dr Anna Mokgokong and Joe Madungandaba and is the largest fully compliant BEE company operating in South Africa’s pharmaceutical sector. The company is 100% black-owned with operations in South Africa and sub-Saharan Africa. CIH has a proven track record holding interests in the healthcare, technology & telecommunication, logistics, mining and power and energy sectors.

Bidvest is a Level 3 BEE contributor and since the formation of the Bidvest/Dinatla(Bidvest’s BEE shareholders) relationship in 2003, value in excess of R3 billion has been physically delivered to Dinatla stakeholders.”
Bidvest’s empowerment credentials, together with the participation of CIH in the Consortium, will significantly add to the total BEE participation in Adcock.”

Mokgokong who serves as CIH’s Group Executive Chairperson, said “CIH’s participation in the

pharmaceutical sector dates back as far as 1992 when CIH entered the pharmaceutical wholesale
It has since operated with the objective of growing and progressing these interests to establish a stronger national and African presence.”
The entry into Adcock provides a further platform off which to leverage to achieve these objectives. CIH is a Level 1 BEE contributor and, as regards its pharmaceutical interests in particular, has adopted a strategy of increasing efficiencies in
local pharmaceutical production and job creation”.

Joffe said “Given CIH’s strong pharmaceutical credentials and Bidvest’s track record of value enhancing investments and strong empowerment credentials, we believe that the Consortium has the credentials to add value to Adcock, something which is clearly required”.

The Bidvest statement added that “The Consortium’s composition of South African companies has a successful track record of over 40 years with uninterrupted growth and experience, and will allow Adcock to benefit from:
•     A strong shareholder base;

•     No immediate upfront requirement to increase the current gearing of Adcock;

•     A further enhanced BEE status, particularly given CIH’s strong pharmaceutical credentials and

Bidvest’s track record of value creation and strong empowerment credentials;

•     Adcock’s existing BEE structures will remain in place; and

•     A continued primary listing on the JSE Limited with shareholders having a substantial residual

direct participation in the performance and dividends of Adcock going forward.

Bidvest added that it has a proven track record of successfully adopting this same model of acquiring meaningful shareholdings across a diverse spectrum of companies. “This has enabled all stakeholders in these companies to benefit from consistent, significant value creation through Bidvest’s direct and continued management involvement in these companies.”

Adcock Ingram shares were trading around R70.16 on the JSE at 11:30 reflecting 0.16 or 11c gain so far for the day.

  • CFR may as well throw in the towel. It is like hammering on cold iron for any overseas company to be victorious over Brian Joffe. The man has triumphed over certain S A businesses and in the process bloodied their noses.The powerful Public Investment Corporation has also indicated it`s unwillingness to entertain CFR`s overtures to woo Adcock Ingram. Odds are heavily stacked against CFR`s success including that they cannot come up with a suitable and powerful BEE partner at short notice. The downside could be that other overseas businesses may have to think twice before commiting themselves to eyeing South Africa as a possible investment destination. It then begs a question, should every international company intending to partner a South African business first satisfy BEE requirements? A yes answer augurs well for financial empowerment.

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