S.Africa's Bidvest ups Adcock stake to block rival $1.2 bln bid

A man walks past the Adcock Ingram offices in Johannesburg

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

By Tiisetso Motsoeneng

JOHANNESBURG (Reuters) - South Africa's Bidvest said it had raised its stake in drugmaker Adcock Ingram to over 34 percent, enough to block a rival $1.2 billion bid and prompt Adcock to seek urgent talks with its Chilean suitor.

Bidvest's move - announced just hours before the start of Adcock's annual general meeting - is likely to end months of wrangling with Santiago-based CFR Pharmaceuticals over control of South Africa's second-largest drugmaker.

Bidvest Chief Executive Brian Joffe wants Adcock's portfolio of over-the-counter medicines and a chance to turn around another underperforming firm.

CFR is looking to build an emerging markets pharmaceutical powerhouse by adding fast-growing Africa to its operations in Latin America and Asia.

It has bid 12.8 billion rand in cash and shares for the drugmaker, an offer backed by Adcock's board but requiring approval of shareholders with 75 percent.

"It's over," Joffe told Reuters, adding that Bidvest now held the 34.5 percent it aimed to buy in a 4 billion rand cash offer direct to shareholders.

Adcock said its board "cannot envisage a realistic basis" for approving the deal with CFR and that it would hold urgent talks with CFR to discuss the fate of the Chile-South Africa tie-up.

Adcock, which has suffered from weak sales and an over-reliance on its home market, also on Friday warned that first-half profit would likely fall at least 20 percent.

"The CFR bid is not going to get approval. It has two options: walk away or go hostile," Alec Abraham, an analyst at Afrifocus Securities, said.

"But if CFR goes hostile, it would be difficult for it to bed down the deal and get synergies out when working with a hostile shareholder. So my guess is CFR will walk away."

CFR officials could not immediately be reached for comment.

Adcock shares were down 3.4 percent to 67.60 rand at 1211 GMT, below both Joffe's offer price of 70 rand and CFR's bid of 74.50 rand worth of cash and its own shares.


The 66-year-old Joffe, who has built a reputation as a canny dealmaker, was rebuffed by Adcock last March when he tried to buy a controlling stake. He aimed to add over-the-counter medicines to Bidvest's sprawling conglomerate of more than 300 businesses ranging from freight and auto sales to frozen food.

Bidvest bought the bulk of a record 39 million Adcock shares traded on Thursday, reaching its target three days before the offer was due to close next Tuesday.

It is not clear whether Bidvest will further raise its stake. Joffe is widely expected to make a full buyout offer, given that he previously tried and failed to acquire control.

If his holding reaches 35 percent, he would be forced to make an offer to minority shareholders, according to Johannesburg Stock Exchange rules.

It was also not clear whether Joffe - now Adcock's top shareholder - would make an appearance at its annual general meeting due to start at 1200 GMT.

Adcock shareholders are due to vote on the CFR deal next month.

In addition to Joffe, South Africa's state-owned Public Investment Corporation (PIC) has said it opposes the CFR offer.

The PIC, which owns 22 percent of Adcock, has said it doesn't want CFR shares because it wants to benefit directly from improvements at Adcock.

The PIC is also the top shareholder in Bidvest, leading to some speculation Joffe is working with the state pension fund to thwart CFR, something he has denied.

Adcock has suffered from lacklustre sales, inefficient distribution and an over-reliance on its home market.

Some analysts say it would make a good fit for Joffe, whose reputation for turning around underperforming companies stems from a focus on cash flow, capital allocation and returns.

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