CFR to Decide on Binding Adcock Offer in Weeks, CEO Says

CFR Pharmaceuticals SA, Chile’s largest drugmaker, will decide within weeks whether to make a binding offer for South Africa’s Adcock Ingram Holdings Ltd., CFR’s Chief Executive Officer Alejandro Weinstein said.

CFR completed due diligence of the Johannesburg-based maker of hospital products and medicines in mid-August, and is now “doing a thorough review of all data to see if we move to the next binding step,” Weinstein said in an interview at CFR’s headquarters in Santiago on Aug. 30. “At this stage, we have to be very rational. No decisions can be done only by gut feeling.”

CFR said in July that it signed a non-binding agreement to buy Adcock in a cash-and-shares deal that values the South African company at a potential $1.3 billion, or 73.51 rand a share. The offer prompted a rival bid from Actis LLP, a London-based private-equity firm, two people familiar with the matter said on Aug. 13. Bidvest Group Ltd., a Johannesburg-based food and car sales company, had placed a bid for 60 percent of Adcock that was rejected in March, and its pursuit remains a “work in progress,” Financial Director David Cleasby said on Aug. 26.

“If there are other bidders it’s a good sign,” Weinstein said. His company has exclusive negotiating rights, he said. “It means that we are aiming for something good. I would be more concerned if there weren’t other interested parties.”

Shareholder Opposition

CFR said in the July statement that it planned to finance the Adcock deal with a $750 million share sale, $500 million of debt and $50 million of cash. Any unsubscribed shares would be listed in Johannesburg and given to Adcock investors, a clause that has been opposed by some shareholders who said such an arrangement may overvalue CFR.

Adcock shares declined 0.3 percent to 65.88 rand as of 4:45 p.m. in Johannesburg, about 10 percent below the potential value of the CFR proposal. CFR’s shares were little changed today at 114 pesos in Santiago.

“If and when we move to the binding offer, we’ll disclose the final details of how much we plan to pay in cash and how much in shares,” Weinstein said. CFR hasn’t decided if the debt portion will be funded through a local or international bond, or if it will seek a syndicated loan, he said.

CFR sold $300 million in dollar bonds in November to yield 5.13 percent. The yield was little changed at 6.3 percent today.

Adcock didn’t immediately reply to an e-mail seeking comment today.

CFR will continue to pursue other large “transformative” acquisitions if it decides to not proceed with a non-binding offer or if Adcock’s shareholders reject the deal, Weinstein said. “We could look for targets in Mexico or in Asia,” he said.

The company, which listed its shares in Santiago in 2011, bought Laboratorio Franco Colombiano Lafrancol SAS in December for $560 million, giving the company what it said would be the biggest share of the market in Colombia. The Andean country is now CFR’s largest market, accounting for 29 percent of revenue in the first six months of 2013, followed by Chile with 23 percent. Peru will surpass Chile in revenue by 2014, Weinstein said.

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