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Bidvest Bids $393 Million for Adcock Stake to Counter CFR

A consortium led by Bidvest Group Ltd., South Africa’s second-biggest company by revenue, made an all-cash offer to buy a 34.5 percent stake in Adcock Ingram Holdings Ltd., countering a cash and stock bid for the whole company by Chile’s CFR Pharmaceuticals SA.

Bidvest and closely-held Community Investment Holdings (Pty) Ltd. is offering 70 rand a share, valuing the stake at 4 billion rand ($393 million), Johannesburg-based Bidvest said in a statement today. Bidvest already owns about 4 percent of Adcock, excluding treasury shares, the company said.

Bidvest’s offer comes 16 days before Adcock shareholders will vote on Santiago-based CFR’s 12.6 billion rand bid, a proposal that has been recommended by the Adcock board. CFR made a firm offer on Nov. 15. Bidvest’s offer is about 13 percent higher than its March attempt to buy a 60 percent stake in the pharmaceutical company, which was rejected.

Adcock is “considering its position” in relation to the Bidvest offer, the drugmaker said in a statement. The CFR deal has support from 45 percent of shareholders, Adcock said Nov. 15. About 29.3 percent of investors eligible to vote have given irrevocable backing, it said.

“Bidvest’s offer may well get some shareholders to swing over as it’s an offer for cash immediately,” Kate Turner-Smith, an analyst at BPI Capital Africa, said by phone from Cape Town. “Investors often see the known as better than the unknown and with the complexity of the CFR offer it would be some months before shareholders get cash in hand.”

Empowerment Stake

The Bidvest offer would also boost Adcock’s black economic empowerment stake, Turner-Smith said. The Public Investment Corp., a manager of South African civil servant pension funds and the biggest shareholder in Adcock, hasn’t given its support for the CFR deal.

“The percent of irrevocables CFR has in support of the offer is low at 29 percent, so Bidvest is offering the other shareholders a legitimate choice,” Wayne McCurrie, a portfolio manager at Momentum Asset Management in Johannesburg, said by phone. “This certainly doesn’t help CFR.”

Adcock shares rose 0.5 percent to 70.41 rand at the close of trading in Johannesburg. The CFR offer values Adcock at 73.51 rand to 77.02 rand per share, the Chilean company said Nov. 15.

“Our offer is higher and will allow all shareholders to benefit from the upside that CFR will give to Adcock,” CFR Pharmaceuticals chief executive officer, Alejandro Weinstein, said in an e-mailed statement.

As of May 31, PIC owned 12 percent of Bidvest and 14 percent of Adcock, according to data compiled by Bloomberg.

Legal Proceedings

Adcock will maintain its primary listing on the Johannesburg Stock Exchange, according to the statement from Bidvest and CIH. CIH is a 100 percent black-owned company, operating in South Africa and sub-Saharan Africa, and has interests in health care, technology and communications, logistics, mining and power and energy, it said.

“We believe that the consortium has the credentials to add value to Adcock, something which is clearly required,” Bidvest Chief Executive Officer Brian Joffe said in the statement.

Bidvest will shortly begin legal proceedings to challenge compliance with legal and regulatory aspects of the CFR offer for Adcock, the company said in a separate statement, without giving further detail. Bidvest complained to the Johannesburg Stock Exchange that Adcock misrepresented the level of support it has for the takeover, Joffe said Nov. 25.

CFR’s shares fell 3.2 percent to 118.13 pesos in Santiago, its biggest fall since July 10.

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