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South Africa's Adcock top shareholder rejects sweetened takeover offer

A man walks past the Adcock Ingram offices in Johannesburg December 3, 2013. REUTERS/Siphiwe Sibeko

By Tiisetso Motsoeneng

JOHANNESBURG (Reuters) - South Africa's state pension fund on Sunday rejected a sweetened offer for drugmaker Adcock Ingram (JNB:AIP), likely derailing a $1.2 billion bid by Chile's CFR Pharmaceuticals (SGO:CFR) to enter fast-growing Africa.

The rejection of the deal by the state-run Public Investment Corporation (PIC), Adcock's top shareholder, could signal victory for local firm Bidvest Group (JNB:BVT), which has launched a counter offer for a little over a third of Adcock.

Santiago-based CFR on Friday lifted its cash and share bid for South Africa's second-largest drugmaker by 1.6 percent to 12.8 billion rand ($1.2 billion) to woo the PIC.

"This new offer doesn't change much. It's a small increase," PIC Chief Investment Officer Daniel Matjila told Reuters on Sunday. "Our message is clear: we want cash, we don't want their shares."

CFR, which is looking to build an emerging markets pharmaceutical powerhouse, needs backing by shareholders holding 75 percent of Adcock for the deal to go through.

Bidvest, a sprawling conglomerate whose businesses include car sales and catering, has increased its Adcock stake to about 7 percent, enough to torpedo the deal when combined with the PIC's 19 percent.

Bidvest founder and Chief Executive Brian Joffe has a history of buying underperforming companies and turning them around by cutting costs and leveraging his group's vast customer base.

The PIC is also the top shareholder in Bidvest, leading to some speculation Bidvest is working with the PIC to block the Chileans, something Joffe has denied.

Bidvest has gone straight to shareholders with a cash offer of 70 rand a share, aiming to take about a third of Adcock.

CFR is offering 74.50 rand worth of cash and shares for each Adcock share, based on a value of 2.334 rand per new CFR share. The final ratio of cash to shares will only be determined after a pending rights issue by CFR.


CFR Chief Executive Alejandro Weinstein responded to Matjila's comments by slamming the PIC for sending "mixed and confusing messages".

"We have not been given any clarity around what the PIC regards as the fair or acceptable value for Adcock," Weinstein said in a statement, adding his company would continue to try to persuade the fund on the merits of the deal.

Reuters could not reach Matjila for comment on Weinstein's statement.

The deal has been acrimonious, with Weinstein and Bidvest's Joffe sparring in the media over the merits of their offers.

Bidvest has also taken to a high court against the deal, arguing that aspects of CFR's planned funding for the takeover violate South African companies law, which CFR has denied and said it would oppose in court.

CFR has said the deal would add around 8 billion rand in foreign direct investment, which would be positive for the rand currency.

Other government departments, including the influential Department of Trade and Industry, have backed CFR's offer, citing the increased investment into Africa's largest economy.

The PIC's stance could reinforce the perception that South Africa is not always friendly to cross-border deals. The government has scuppered acquisitions by overseas companies in the past, especially if they are seen as less than beneficial for the country's black majority.

CFR's CEO has already said his company's bid for Adcock is "fully compliant" with black empowerment regulations.

Adcock has struggled in recent years, eclipsed by domestic rival Aspen Pharmacare (APNJ.J) which has made an aggressive push into overseas markets. ($1 = 10.3098 South African rand)

(Reporting by Tiisetso Motsoeneng; Writing by David Dolan; Editing by Louise Ireland and Sonya Hepinstall)