CFR Pharmaceuticals SA, Chile’s largest drugmaker, agreed to pay 12.6 billion rand ($1.3 billion) in cash and shares for Adcock Ingram Holdings Ltd. as it seeks to expand in emerging markets.
CFR will settle 51 percent to 64.3 percent of the purchase through cash and the balance through new CFR shares, the companies said in a joint statement today. The transaction equates to 73.51 rand an Adcock share, they said. The stock rose 3.2 percent to 68.10 rand by the close in Johannesburg, suggesting investors have yet to be convinced that the offer will be successful.
The companies have had engagement with South African regulators and this has “gone extremely well,” Khotso Mokhele, chairman of Adcock Ingram’s independent board, told reporters on a conference call.
CFR fended off competition from London-based private equity firm Actis LLP and Bidvest Group Ltd., a Johannesburg-based food and car sales company, in agreeing to buy Adcock, the maker of drugs including Panado painkillers. CFR, which listed stock in Santiago in 2011, bought Laboratorio Franco Colombiano Lafrancol SAS in December for $560 million, giving it the biggest share of the Colombian market.
The Public Investment Corp., which oversees the pension funds of South African government workers, would be willing to consider a strategic partner or investor if a cash offer is for a 50 percent plus one share control of Adcock, Chief Investment Officer Dan Matjila said on July 17. The PIC holds 14 percent of Adcock, according to data compiled by Bloomberg.
Oasis Group Holdings, which holds 2.3 percent of Adcock shares, on July 16 said it won’t support the CFR bid as it doesn’t want the Chilean company’s stock.
For the offer to succeed, 75 percent of shareholders will have to vote in favor of the deal, Mokhele said.
The deal “will create a uniquely diversified emerging markets pharmaceuticals company with listings in Santiago and Johannesburg, targeting a market of over two billion patients across Latin America, Africa, South East Asia and India,” the companies said in the statement.
The transaction will allow CFR to make cost savings worth at least $440 million, according to the statement. Adcock Ingram will generate as much as 40 percent of the group’s combined revenue. Adcock will be delisted from the Johannesburg exchange and CFR plans a secondary listing on the bourse, they said.
CFR will transfer “manufacturing capacity to South Africa, preserving and growing jobs and maintaining Adcock Ingram’s commitment to broad-based black economic empowerment,” it said, referring to South African laws that require companies to sell at stakes in their local operations to black citizens, with transactions that benefit workers being favored.