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Just after Biznews.com launched, mining entrepreneur Bernard Swanepoel wrote us a piece lamenting how hostile takeovers are so difficult under South African law. Swanepoel, of course, spoke from experience. He was Harmony’s CEO when it launched that hostile bid for Goldfields Limited – but failed because of a system that allowed Goldfields to drag things out.
We may well be witnessing a repeat in the battle for Adcock Ingram between Chilean group CFR and Bidvest’s Brian Joffe. The Chileans have a compelling business case. So strong that they convinced the Adcock board it was the best offer shareholders would ever get.
But Joffe believes in the right hands (his) the pharma group’s assets can perform far better. He is doing his best to convince the deal’s “kingmaker”, the Public Investment Company, of that. Just in case, he’s also launched a court action that could effectively drag proceedings for months.
On Tuesday, Joffe chose our CNBC Africa Power Lunch programme to break his ten month silence on the transaction. It was a fascinating interview, one well worth watching if you didn’t catch it live. The next morning, CFR sent it’s eloquent Harvard MBA Italian Daniel Salvadori to rebuff Joffe’s arguments.
Having engaged closely with both protagonists, although CFR has a compelling business case, Joffe is likely to win this battle. He knows South African law and local politics far better than his South American rivals. Joffe’s other advantages are size (Bidvest is four times the market cap); a credible BEE partner in CIH; and a track record of successful turnarounds.
But probably the best thing to come out of the entire exercise was yesterday’s comments by one of the country’s leading investment strategists, Investec’s Michael Power.
He was forthright in his view that South Africa is treating CFR shoddily; and that if Joffe succeeds, shareholders will lose any chance of forcing a control premium. While Power surely erred by not factoring in a Adcock share price appreciation from R50 to R70 since Joffe’s interest began (ie the control premium) that he was comfortable expressing an opinion so obviously against thee party line says much for his independence. Power’s employer, Investec, is Bidvest’s closest, longest-standing and most trusted advisor.
The week before Christmas promises to be a rather active news-wise. On the 17th, the disastrous MTN Zakhele listing is due to have a third try at allowing its 120 000 shareholders to trade stock that’s appreciated fourfold in three years. The Adcock vote is on December 18th. With the PIC not having finally committed itself, that could go either way. But the Bidvest consortium did get a boost yesterday when asset manager Oasis tendered its shares taking Joffe’s stake to just under 7%.
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Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.