Adcock Receives $1.3 Billion Bid From Chile Drugmaker CFR

Adcock Ingram Holdings Ltd. said it received a non-binding bid from Chilean drugmaker CFR Pharmaceuticals SA that values South Africa’s largest supplier of hospital products at 12.9 billion rand ($1.3 billion).

The potential offer price from CFR is 73.51 rand, 14 percent more than Adcock’s closing price of 64.50 rand yesterday, Johannesburg-based Adcock said in a statement today. CFR would pay in cash and stock, the South African company said.

The bid comes three months after Adcock rejected a 6.2 billion-rand cash and shares offer from Johannesburg-based Bidvest Group Ltd. for a 60 percent stake in the company. Adcock shares rose 1.3 percent to 65.38 rand by the close in Johannesburg, suggesting investors have yet to be convinced that this latest offer will be successful.

“What the share-to-cash ratio will be is key,” Mathew Menezes, an analyst at Avior Research, said by phone from Johannesburg. “The less cash is offered, the less enthusiastic the market will be. Ultimately, if there had been a big name making this offer for a cash amount, there would have been a stronger initial reaction.”

Compelling Rationale

CFR is Chile’s largest drugmaker, with operations in Latin America, Europe and Southeast Asia. The combination would create a company with annual revenue of about $1.3 billion and an asset base of approximately $2.1 billion, Adcock said. It would have a presence in more than 23 countries and employ more than 10,000 people.

“This offer has a compelling rationale from an emerging market point of view,” Andrew Thompson, an independent director at Adcock, said in a phone interview. “There is no South African company that could have offered this combination.”

The Public Investment Corp., the South African government-employee pension-fund manager that’s Adcock’s biggest shareholder, said May 14 that it would prefer that a domestic company buy the hospital-supply provider.

“It would be inappropriate for the PIC to comment at this stage,” spokeswoman Nomzamo Petje said by e-mail regarding the CFR proposal. “The transaction is still under consideration and therefore the PIC would like to allow the due process to take place.”

Skepticism Locally

CFR, which listed in Santiago in 2011, bought Laboratorio Franco Colombiano Lafrancol SAS in December for an undisclosed amount, giving the company what it said would be the biggest share of the market in Colombia.

A spokesmen for Bidvest, which said in May that it’s still interested in Adcock, didn’t reply to an e-mail seeking comment today.

“There is some skepticism locally as people try and digest this offer,” David Shapiro, a director at Johannesburg-based Sasfin Securities, said by phone. “I wouldn’t write off a counter offer.”

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