Adcock investor complains to Johannesburg exchange about CFR deal

Chile's CFR Pharmaceuticals faces one more obstacle in its bid for the South African drugmaker Adcock Ingram. After wooing Adcock for months, the Chilean company now faces stepped-up opposition from selling shareholders.

Last week, Adcock's biggest investor--the state-owned pension fund manager Public Investment Corporation (PIC)--officially refused to back the deal. Now, a shareholder has filed a complaint with the Johannesburg Stock Exchange (JSE), saying that Adcock's board misled investors about shareholder support for CFR's $1.2 billion takeover.

Here's the background: After PIC nixed the deal, sources told Reuters that the pension fund manager didn't like the cash-and-stock structure; it sees CFR stock as overvalued. Plus, PIC worried about a foreign drugmaker controlling a key South African pharma company.

But CFR's top executive went to South Africa to smooth the way for the deal and was sufficiently encouraged to officially lodge a $1.2 billion bid. That was Friday--and here's where the JSE complaint comes in. As Reuters now notes, the two companies said at the time that shareholders controlling almost 30% of Adcock had given the deal their final blessing and another 7.5% had issued letters of support.

That obviously leaves the companies a big gap to bridge. And just two weeks before, CFR and Adcock had said investors with a 45% stake in the company were backing the bid.

As Reuters reports, Adcock says it didn't mislead investors; that 45% included black investors who had waived their right to vote on the deal as part of an arrangement with CFR allowing them to keep their shares when the deal is complete. South African rules require companies bidding for big government contracts--such as drug tenders--to maintain specified levels of black ownership.

- read the Reuters news

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