Most drugmakers say mergers are what they need to become bigger and more profitable. South Africa's Adcock Ingram says it needs a proposed merger just to survive.
"The continuing consolidation of the global pharmaceutical market has again challenged the long-term sustainability of Adcock Ingram's business," Adcock said in a statement, according to Reuters. The confession was made as Adcock faces opposition to its $1.2 billion takeover by Chile-based CFR Pharmaceuticals.
As if offering up proof of that, the company last week reported a 17% plunge in its full-year profits as a weakening rand made its imported raw materials more expensive, Reuters reports.
The company's largest shareholder, state pension fund Public Investment Corporation (PIC), is resisting the cash-and-stock deal, sources say, because of concerns about foreign ownership of the drugmaker. The fund holds 19% of Adcock's shares, and CFR needs support from 75% of the drugmakers' shareholders in a vote next month to be able to proceed with the deal. Another shareholder this month opposed the deal, saying that the company's board misled investors about shareholder support.
Adcock is the country's largest maker of over-the-counter drugs, but most of its sales are in South Africa and its profits have been hurt by slower sales there. CFR has said that it could cut costs by using Adcock's excess manufacturing capacity and combining the two companies' API purchases. It says it has no plans to lay off Adcock employees and the merger would give Adcock access to international markets. Despite the resistance to the deal, CFR says it is confident that it will get the support it needs to close the deal.
- read the Reuters story
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