Joffe shows his hand on Adcock – teams up with Anna Mokgokong’s CIH to offer R70 cash. Bye-bye CFR?
Bidvest founder Brian Joffe has finally shown his hand in the fight for control of historic but badly under-performing SA pharma group Adcock Ingram. This morning Joffe released details of his alternative offer for Adcock on the Stock Exchange News Service. It is offering shareholders the opportunity to cash in now, at R70 a share, until such time as the consortium's stake hits 34.9%. Joffe has used similar tactics in landing both AMAP and Mvelaserve, now both wholly-owned subsidiaries of Bidvest. Once shareholding gets to 35% all kinds of regulatory issues are triggered including the need for Competitions Commission approval and, in terms of the JSE requirements, detailed documentation to shareholders. Fulfilling these requirements can take many months. Allied to this tactic of seeking a quick build-up of stock, the Bidvest consortium also announced on SENS it will challenge the "legal and regulatory aspects" of the proposed CFR/Adcock transaction in court. This could well sway shareholders to accept the Bidvest offer even though it is around 10% below the cash plus CFR share alternative on the table. The advantage is that it is unconditional (until reaching the 34.9%), is in cash and immediate. On the flip side, the Adcock share price rose above R70 this morning as traders sensed a possible counter-offer from CFR. The Press Release republished below summarising details of today's offer, is republished below. Chilean bidder CFR has been courting Adcock's biggest shareholder, the Public Investment Company, whose vote will decide the issue. On the face of it, the Bidvest consortium's offer looks more attractive to both the PIC and those shareholders who have been holding out for an all-cash offer. For Adcock CEO Jonathan Louw a Bidvest takeover would spell the end of his time at the pharma group. It is no secret that Joffe regards Adcock's management and its board as the reasons why the group has under-performed. But Louw won't be too unhappy. At the R70 cash offer now tabled, his phantom shares and share options would net him a juicy R16.8m profit – R3.5m less than what he would bank were CFR to succeed, but added to last year's R10m, enough for the 44 year old to depart a rather wealthy man. The other executive director Andy Hall would get R9m from the Bidvest deal. Again, below the R11.3m from a successful CFR transaction, but substantial none the less. – AH
The full Press Statement is republished below for your convenience:
Bidvest and CIH have formed a Consortium ("the Consortium") and announced a cash offer to acquire up to 34.5% of the issued ordinary shares in Adcock (excluding treasury shares). Bidvest currently owns approximately 4% of the issued ordinary shares in Adcock (excluding treasury shares). The Consortium is being led by Bidvest.
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 Limited with shareholders having a substantial residual direct participation in the performance and dividends of Adcock going forward.
CIH was founded by Dr Anna Mokgokong and Joe Madungandaba. It 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.
CIH's Group Executive Chairperson, Dr Anna Mokgokong, commented, "CIH's participation in the pharmaceutical sector dates back as far as 1992 when CIH entered the pharmaceutical wholesale arena. 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".
Bidvest CEO, Brian Joffe, commented, "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 offer is unconditional and is open immediately. On acceptance, Adcock shareholders participating in the offer will immediately receive an upfront cash consideration of R70 per Adcock ordinary share. This is a significant direct investment by the Consortium of approximately R4 billion and will be funded by way of available cash resources.
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.
Links to other Biznews.com articles on the Adcock Ingram takeover battle: