Adcock turnaround plan gaining traction


Johannesburg - Drugmaker Adcock Ingram [JSE:AIP] reported a 38% rise to 83.8 cents in half-year headline earnings per share on Monday, a sign that a turnaround plan that include cost cuts and adopting a centralised business model is gaining traction.

South African conglomerate Bidvest has offered about $515m for the shares it does not already own in Adcock in a new attempt to build a big presence in the pharmaceutical market.

Adcock has not yet commented on the Bidvest approach.

READ: Bidvest offers to acquire Adcock Ingram

"Considering the potential turnaround of the company, I think it is definitely an opportunistic bid," said Simon Mather, analyst at Barclays, who has a "neutral" rating on the stock.

"In a more optimistic scenario about the prospects of Adcock, we got to a fair value of 69.5 rand per share provided management is able to orchestrate a meaningful turnaround of the business."

Bidvest's offer values Adcock at around R9.1bn - below its enterprise value of about R10bn, according to Thomson Reuters data.

Bidvest has been trying to take control of Adcock since 2013, seeing an opportunity to turn around an underperforming company and add painkillers and cough syrups to its stable of products.

Last year, it sank a R12.8bn, or R74.5 per share, takeover offer for Adcock from Chile's CFR Pharmaceuticals by building a blocking stake that gave it the current holding.

In March 2013, Bidvest offered a 10% premium for a 60% stake in Adcock, a bid spurned by Adcock's board at the time as opportunistic.

READ: Bidvest writes down Adcock stake by R1bn

The deal would give Bidvest a substantial presence in the generic market, which is set to grow as the government prepares a national health insurance plan that would rely on the use of cut-price versions of branded drugs.

Bidvest already owns a 34.5% stake in the drugmaker, which it acquired a year ago, scuppering a rival bid from CFR.

Adcock is trailing rivals as it struggles with slowing sales, over-reliance on a heavily regulated home market and factories that are running below capacity.

Under the latest offer, Bidvest would pay about R6bn, or R52 per share, which represents a 3.6% premium to Adcock's closing price on Friday.

Shares in Adcock jumped as much as 6.6% during the session. By 16:10, the stock had given up some its gains to trade 4.3% higher at R52.34.

ALSO READ: Bidvest can now block Adcock take-over

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