‘Adcock is too important to sell’

2013-12-15 14:00

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One of the rival bidders for a stake in pharmaceutical company Adcock Ingram, Dr Anna Mokgokong – whose Community Investment holdings (CIH) has teamed up with Bidvest – strongly believes that Adcock is too important an asset to sell to Chilean company CFR.

Mokgokong also believes Adcock – which houses popular brands such as Panado, Compral and Corenza – could be an important vehicle to increase black participation in the pharmaceutical industry.

The binding offer of R12.6?billion for control of Adcock by the Chilean pharmaceutical company, in a combination of cash and shares, which shareholders will vote on next month, has caused much controversy.

Industrial giant Bidvest, which had its bid for Adcock earlier this year rejected, returned with a consortium including CIH to offer shareholders R70 a share to acquire up to 34.5% of the issued shares of Adcock.

On Friday, CFR upped its offer to R74.50 per share from R73.51.

Mokgokong says: “What investors do when there is something like this is to wait and see. Bidvest was able to buy some shares in the market and that has given it now just under 7%, but what [investors] are doing is to watch and see. If I was an investor, I would also take that approach.”

Mokgokong says that at present, they are focusing on which way the vote goes – “the vote should be a ‘no,’” she adds – and then “we can go back to the shareholders and say ‘let us talk about our offer and what you want’”. She adds: “If they vote for [the deal], well then I guess everything falls apart.”

Adcock directors say that an advantage of combining with CFR is that it would provide a platform for the combined company to grow and access high-growth markets.

Mokgokong compares Adcock to its much larger competitor Aspen.

“Aspen is operating in the same environment, and has grown and has gone out into the world. So you don’t [necessarily] need multinationals to help you grow.

They say that these Chileans will enable Adcock to grow worldwide, but Aspen has been able to do that without a foreigner.”

She believes that what Adcock needs is visionary leadership.

Bidvest has laid a legal complaint against CFR’s proposed method of financing the deal. CFR needs a guarantee from Adcock to finance a loan required to complete the deal.

But the Adcock board has decided to oppose Bidvest’s legal challenge, saying it is “ill-founded”.

Mokgokong takes a firm stance. “People keep raising this [issue] of foreign direct investment and when you look at this deal, where is the foreign direct investment? They [CFR] don’t even have the money. They are going to use this asset to raise the money, so Adcock will be servicing a debt. Our deal has money on the table, and it is cash.”

One of the things CFR is bringing to the table that may entice investors is the pipeline of new products it brings with it. But, according to Mokgokong, this is not a problem.

She says: “We have had calls from multinationals [saying] they are behind [us] and they will provide us with a pipeline of new products so that we can increase the offering?of Adcock.”

But her biggest concern, something she might have in common with the Public Investment Corporation (one of Adcock’s biggest shareholders), is to keep Adcock’s ownership local as she believes it is too important an asset to allow it to fall into foreign hands.

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