Bidvest beats CFR in hostile bid for Adcock

2014-02-02 14:00

Chilean firm CFR’s R12.8?billion bid to take over Adcock Ingram is all but dead, thanks to Bidvest, which raised its stake in South Africa’s second-largest pharmaceutical company on Friday – a move that may end up being one of the few successful hostile takeovers in the country.

On Friday morning, Bidvest said it – and Community Investments Holdings, led by businesswoman Anna Mokgokong – had amassed 32.03% of the shares in Adcock on Thursday, the share’s heaviest trade volumes in five years, when more than 39?million shares changed hands.

This was part of its cash offer to buy 34.5% of the company for R70 a share. By Friday afternoon, it had reached its goal, announcing it had bought all 34.5%, which is just shy of the 35% threshold that would force it to make a mandatory offer for all of the company’s shares.

Bidvest’s bid has been called hostile after Adcock rejected an earlier offer by the company and sided with the bigger rival, CFR Pharmaceuticals, against Bidvest’s advances. Bidvest is just one of a handful of companies in recent memory to have succeeded in a hostile bid.

Other hostile bids over the past 14 years – including mining company Xstrata’s bid for counterpart Anglo American, Nedcor’s bid for Standard Bank, Harmony’s bid for Gold Fields and BHP Billiton’s bid for Rio Tinto – failed miserably.

Only a few, including the Japanese company Kansai Paint’s 2011 takeover of Freeworld Coatings, which manufactures the popular Plascon paints, succeeded.

Last March, Bidvest, then holding about 2.54% of Adcock, made a play for 60% of its target’s shares. It proposed to pay half the purchase price in cash at R65 a share, with the other half being the exchange of one Bidvest share for every four Adcock shares.

Adcock declined to present the offer to shareholders, instead presenting a similar cash and share offer from CFR worth R12.6?billion in September. On December 2, Bidvest retaliated with an all-cash offer of R70 for a smaller stake in the company, sparking a tug of war with CFR that saw the Chileans sweeten their offer to R12.8?billion by December 13.

Bidvest’s larger stake this week effectively killed the CFR bid because 75% of Adcock’s shareholders are needed to approve the deal. A few hours after Bidvest’s announcement on Friday morning, Adcock conceded defeat.

“The Bidvest consortium?...?is in a position to unilaterally block the approval of the [CFR] scheme,” it said. “The independent board cannot envisage a realistic basis on which the scheme will be approved.”

But Adcock would proceed with proposing CFR’s offer because it had to stick to the transaction implementation agreement, but said it would “urgently” engage with CFR on the implications of the new developments.

At Adcock’s annual general meeting later on Friday, chair Khotso Mokhele defended his board’s decision to go with CFR, saying it had conducted a vigorous process to assess a “number of proposals” that it had received.

“The board put before shareholders a proposal that it believed met its mandate and benchmarks,” he said. “This proposal was a strategic fit for the company. It provided long-term growth prospects and enjoyed strong support from Adcock Ingram shareholders.”

Bidvest, appearing to exercise its new-found muscle, booted Andrew Thompson – who was a member of the independent board committee that backed the CFR offer – off the Adcock board at the meeting.

The only other independent committee member eligible for re-election, Leon Schönknecht, did not avail himself. A spokesperson for CFR declined to comment on the latest developments.

» In the original version of this article, City Press incorrectly stated that Andrew Thompson had led the independent board committee that backed the CFR offer. Thompson was a member of the committee.

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