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PIC Sees Value for Adcock Shareholders in Management Changes

The Public Investment Corp., the largest shareholder in Adcock Ingram Holdings Ltd., said it opposes CFR Pharmaceuticals SA’s takeover of the South African drugmaker as it believes shareholders can get more value through changes in the way the company is managed.

“CFR shares are fully valued whilst Adcock Ingram’s share price has the potential to rise substantially in value through better management,” PIC Chief Executive Officer Elias Masilela said in an e-mailed statement.

CFR raised its offer to buy Johannesburg-based Adcock by 2 percent to 12.8 billion rand ($1.2 billion) last week. The bid, a minimum of 50 percent of which would be paid in cash, values each share in the company at 74.50 rand to 75.78 rand, Adcock said. CFR, Chile’s largest drugmaker, said Dec. 17 that the PIC’s opposition to its takeover is for nationalist reasons. The PIC says it supports foreign investment into South Africa.

Attempts to wrestle control of Adcock started in March, when Bidvest Group Ltd. offered to pay about 6.2 billion rand in cash and stock for a 60 percent stake. Since then, CFR emerged as the most likely suitor, securing the support of Adcock’s board. A group led by Bidvest made an all-cash offer of 70 rand a share to buy a 34.5 percent stake in Adcock on Dec. 2.

The PIC, a manager of South African civil-servant pension funds and the owner of almost 20 percent of Adcock, said CFR’s share and cash proposal reduces Adcock shareholders’ potential to benefit from any turnaround in the company.

Shares Climb

Adcock rose 1.4 percent to 71.50 rand by the close in Johannesburg. The stock has climbed 27 percent since Bidvest’s first offer for Adcock on March 22. That compares to a 41 percent increase in larger rival Aspen Pharmacare Holdings Ltd.

The PIC, based in Pretoria, also cited control of CFR by the family of Chief Executive Officer Alejandro Weinstein as a reason for its opposition to the deal.

“Given our experience of corporate-governance challenges with some family-controlled businesses locally, we believe this introduces risks to the investment,” Masilela said.

CFR’s engagements with the PIC have been unsatisfactory and “the messages we have received have been mixed and confusing,” Weinstein said in the statement earlier this week.

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