Bidvest Group Ltd. offered to pay about 6.2 billion rand ($670 million) to amass a 60 percent stake in Adcock Ingram Holdings Ltd. and take a stronger foothold in the hospital products and medicines market.
Bidvest, which operates businesses from cleaning and car sales to coal export terminals, offered to buy out shareholders half in cash at 65 rand a share and half in shares at a ratio of one Bidvest share for every four Adcock shares, Johannesburg-based Adcock said in a statement today.
That values each Adcock share at 62.14 rand, a premium of about 10 percent on the March 20 closing price, according to Bloomberg calculations. The 60 percent stake includes the 2.54 percent Bidvest already owns, Adcock said.
Bidvest “will turn around the business as Adcock is struggling a bit,” Hugan Chetty, an industrial analyst at Johannesburg-based Afrifocus Securities Pty Ltd, said in a phone interview. “Bidvest builds brands. They have quality brands in the stable.”
Adcock rose as much as 12 percent and was up 9.3 percent at 61.40 rand at the 5 p.m. close in Johannesburg, giving it a market value of 10.8 billion rand. About 3.6 million shares traded, or 7.5 times the three-month daily average. Bidvest, which is also based in Johannesburg, fell 0.9 percent to 237.13 rand.
“This is definitely good news for Adcock,” Mathew Menezes, an equity analyst at Avior Research, said by phone from Johannesburg. “Adcock needed a shareholder of reference, it needed this catalyst.”
Adcock, which sells Panado painkillers and Corenza cold medicine, said in November full-year earnings fell because of rising production costs and a weaker rand. The company, which was a unit of Tiger Brands Ltd. until 2008, has been expanding in Africa as the continent’s demand for medicines grows.
Bidvest said earlier this month it expected to maintain double-digit earnings growth in the first half of 2013 as the economy improves. It offered to buy shares in household appliance maker Amalgamated Appliance Holdings Ltd. last year and also struck a deal in Chile.
Further acquisitions of about 10 billion rand are “easily achievable,” Bidvest Chief Executive Officer Brian Joffe said in an interview on March 4.
Bidvest, the eighteenth-biggest company in the 166-member FTSE/JSE Africa All Shares Index, earns most of its revenue and profit outside South Africa, according to its earnings statement for the fiscal first half through December.
A spokeswoman for Adcock who works for Brunswick group declined to comment beyond the statement when contacted by phone. Bidvest’s Joffe said it was “too early” for any further comment in an e-mailed response to questions.