Bidvest’s Joffe victorious in War for Adcock Ingram – now he wants to win the Peace
I've been accused of bias in the battle for under-performing pharmaceuticals company Adcock Ingram. Biased, that is, in favour of Bidvest and its founder Brian Joffe, whose approaches were spurned by the Adcock board of directors in favour of an offer from Chilean group CFR. Whatever the perception of CFR's super-helpers, they can accuse all they like but cannot change the facts. Which include that Adcock, a long-established business with priceless brands, has performed poorly under its existing management team – something which sparked both Joffe and CFR's interest. To my mind, it was inappropriate for Adcock to be sold to a small foreign player (CFR is not much bigger than Adcock itself ) at a price that was depressed not because of the inherent value of the company, but through the inability of existing managers to add value. And to an opportunistic offshore buyer which did not even have the resources to make an all-cash offer. After ten months of an often acrimonious battle, the people who really matter in this case – the company's shareholders – have voted with their feet. Today Joffe announced that CFR's attempted takeover had been killed off. Now he wants to declare peace. – AH
ALEC HOGG: The battle for Adcock Ingram is over. The Bidvest and CIH consortium announced this morning that it now owns 32 percent of the stock. Bidvest Chief Executive Brian Joffe will be attending the Adcock annual general meeting, which starts in just under an hour. We caught up with him this morning. I asked him whether he would be working in concert with the Public Investment Company as the two parties now control over 50% of Adcock Ingram:
BRIAN JOFFE: We obviously have no relationship with the PIC and I think that by the end of the day today we'll have our 34.5 percent. We own our 34.5 percent and at some point in time, we're going to have to liaise with whomever. I'm not 100 percent sure what the mechanics are going forward, to be honest with you Alec.
ALEC HOGG: The mechanics today are quite interesting. It's the annual general meeting of Adcock Ingram. Are you going?
BRIAN JOFFE: Yes, I will go. I think for me it's time to maybe build some bridges, stop all the arguing and bickering, and see whether we can find some common ground to make sure that at the end of the day, we make some money on our investment.
ALEC HOGG: You've done this kind of thing before, Brian – not as acrimoniously perhaps, though – as happened with Adcock Ingram, CFR, and the managers' etcetera. Do you think it's going to be a bigger hurdle to overcome?
BRIAN JOFFE: Look, to be honest with you, I don't really know. I think, and my hope is, that everybody will work together for the benefit of the Adcock Company, and that we will find some common ground. I think for me certainly, there will be some changes in strategy if we ever get to be the dictator of that. That, of course, is not really dependent on us at the moment. I think there are some direction changes that I would like to see happen at Adcock over time, so I'm hopeful that working together with the management – whoever that will be – at some point in time, that we'll be able to implement some of these ideas.
ALEC HOGG: While you were engaging with shareholders – because clearly, you've been trying to accumulate the stake that you will have by the end of today, of 34.5 percent – where there any who said 'we'll give you some, but not all?
BRIAN JOFFE: Alec, it wasn't that kind of liaison that we had with shareholders. The interaction that we've had with shareholders in relation to what's going to happen in the future is very limited. A lot of that took place when we were talking in March last year. For example, yesterday, the sales were at the initiative of the sellers, and not at the initiative of us trying to pursue them. The offers were obviously coming to an end and what we had banked on was that the irrevocables were also coming to an end yesterday and so that is what our strategy was in terminating the offer on the 4th.
ALEC HOGG: The irrevocables in favour of CFR…
BRIAN JOFFE: Correct.
ALEC HOGG: So, some of those who would have given irrevocables to the CFR in the first instance have sold.
BRIAN JOFFE: Correct.
ALEC HOGG: They prefer your offer – interesting.
BRIAN JOFFE: There isn't another offer, so I'm not too sure, where the other offer is. There's no documentation that has been sent out yet in relation to the postponed meeting, so I'm not… I must be honest with you, Alec; it's all new to me. I'm not really sure what's going to happen from here on out. All I do know is that we own about 34 percent. We'll have to see what happens today, and into next week.
ALEC HOGG: As I've said before, you have done this in the past. What have the steps been that you've adopted when you've had 34.5 percent of a company and then going forward from there?
BRIAN JOFFE: Look, I think we have some strategic ideas and in relation to past business of this sort, we've had some strategic ideas. Fortunately, those have been good for the companies in which we've invested. You can see them and you know which ones they are, so hopefully, as I said, the same will apply here. This of course, is a slightly different business because it has a certain amount of regulation in it, so we have to deal with it. However, I'm quite excited about it. For Bidvest, it's a totally new route and if we can get management control of it – and we obviously need to get Competition Approval to do that – then of course, I'd like to see some of the Bidvest philosophies in the business. I'd like to see the business look more entrepreneurial. I'd like to see it – obviously – expand its geographies. There are certain components of the business that I really don't want to discuss, which offer huge potential, and then there are quite a lot of synergies for Bidvest. It's just simple blueprints, all the inserts for all these different tablets and products that they sell. There are boxes that have to be printed and made, and there are inserts that have to be printed. It's a silly one, but for us that could be quite a big number.
ALEC HOGG: Anna Mokgokong – your partner, because we spoke in Bidvest, but its Bidvest and CIH, which is in the consortium: is she going to play a more active role?
BRIAN JOFFE: Well, I have no doubt that they will. We obviously are very conscious that it will be a requirement in making Adcock or building in Adcock, and they're obviously keen to participate. They also have some pharmaceutical experience and we'd obviously like to take advantage of that, but we'd obviously need to build a team and at the moment, the team is what it is. We haven't lined up a whole lot of people that can come and walk in there tomorrow. We just haven't done that. Our first step, as I said, is obviously to consult and talk to those that want to talk to us and thereafter, we'll have to make some calls and see how the thing goes. We're obviously conscious of the fact that we could be limited by our ability in relation to having to get Competition Approval in advance on some of the stuff.
ALEC HOGG: Brian, clearly the Chileans had a proposition that appealed to the board at Adcock Ingram. Is there any part of you that says 'well, let bygones be bygones; perhaps we can even work with CFR in future'?
BRIAN JOFFE: I think that what I've said before, not necessarily only in relation to CFR, I did say it to the shareholders at the time in March of last year. The one area I think that Adcock could do with a strategic partner is the generics business. Maybe…I don't know if CFI have spoken to them. Maybe they're very cross with me. As I said, I think from our point of view, what we really are looking for at the end of the day, is to build and to renew the profile image – and growth profile, more specifically – for Adcock. It's a company that needs to show its true colours. It has a big history. It has fantastic products. It's the second-largest pharmaceutical company in South Africa. There's no real reason why it shouldn't grow, be better, and internationalise. As I said, its early days but the excitement is there.
ALEC HOGG: Are you not ruling out talks – potentially – with CFR?
BRIAN JOFFE: No, from my point of view this has been a business transaction. It's nothing more than that, and whatever is good for Adcock we hope, obviously, to the extent that we can influence it, we must do so. We have a responsibility to Adcock shareholders. All of us do, as not only as a 34 percent shareholder, a ten percent shareholder, or a five percent shareholder; a shareholder should have a responsibility of making sure that the company grows and that's what we will do. As I've said, there are constraints on us at the moment. I don't know where this things eventually going to land up. I haven't spoken to anybody at Adcock. Hopefully, today I'll be reasonably received and we'll work from there.