Bidvest Filed Legal Action Against Adcock Regarding Finance

Bidvest Group Ltd., a South African company with operations from car sales to electricals, said it filed a legal complaint against drugmaker Adcock Ingram Holdings Ltd. today regarding the financing of a proposed takeover by Chile’s CFR Pharmaceuticals Ltd.

CFR said Nov. 15 it made a 12.6 billion-rand ($1.2 billion) cash and stock offer for Johannesburg-based Adcock, which shareholders will vote on later this month. Bidvest said yesterday it would offer 70 rand a share in cash, or 4 billion rand, for a 34.5 percent stake and start legal proceedings.

CFR needs a guarantee from Adcock to finance a loan required to complete the potential deal, Bidvest said in a legal document lodged in the high court today. Provision of that guarantee would be “unlawful,” the document said.

“You cannot use the assets of the target company to finance the transaction,” Bidvest Chief Executive Officer Brian Joffe said in an interview at the company’s headquarters in Johannesburg today. “We have a very strong opinion from senior counsel and what they’ve done is illegal.”

CFR is confident its proposal complies with South African regulation and is considering filing a complaint of its own against the Bidvest offer, Chief Executive Officer Alejandro Weinstein said during a conference call with reporters from Chile.

“I ask Joffe to put up or shut up, and present an offer for 100 percent,” Weinstein said.

‘Negative Control’

Bidvest has built a stake of about 4.5 percent in Adcock and eventually wants control of the drugmaker, Joffe said. Bidvest made a 6.2 billion rand offer for a 60 percent stake in March that was rejected by the Adcock board.

“We’re going to put ourselves in the best possible position to be able to make a bid,” Joffe said. “We want to put ourselves in the best possible shape where we will be able to be a suitor of the other shareholders.”

Adcock said the offer by Bidvest and closely held Community Investment Holdings (Pty) Ltd. may result in the partnership gaining “negative control” of the drugmaker.

“While the Bidvest consortium may via its shareholding exercise material influence over Adcock Ingram, the benefits and potential synergies for Adcock Ingram shareholders, who will remain invested alongside the Bidvest consortium, have not been clearly articulated,” Adcock said in a statement today.

Adcock shareholders will vote on Dec. 18 whether to accept CFR’s bid, which has been recommended by the board. The proposal equates to about 75 rand per share, Adcock said today. The shares fell 0.6 percent to 70.01 rand at the close of trading in Johannesburg.

The Public Investment Corp., Adcock’s biggest shareholder with a 19 percent stake, hasn’t supported the CFR offer, which needs backing from 75 percent of shareholders present and entitled to vote at the meeting to succeed.

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