Chile's CFR wins shareholder OK for Adcock buyout financing

Chilean drugmaker CFR Pharmaceuticals is one step closer to its goal of buying South Africa's Adcock Ingram. CFR shareholders approved a $750 million increase in capital, which would provide more than half the funding for the $1.3 billion transaction.

CFR lodged its bid for Adcock earlier this month, saying the deal would offer new outlets in Africa for its own products and new markets in Latin America for Adcock's HIV drugs and over-the-counter products. With 2012 sales of $570 million, CFR figures adding Adcock to the mix would create a $1.3 billion combined company, with increased strength in emerging markets.

The Chilean company also sees opportunities to cut costs. Bulk purchasing of active pharmaceutical ingredients could save money, CFR has said. More importantly, Adcock has some excess manufacturing capacity that could be used to amp up production of CFR drugs. The company said it has no plans to cut jobs, however.

CFR could move manufacturing of some of its drugs to South Africa. And that's a prerequisite for selling some products in that country. Last year, the government expanded its list of medications it will buy only if manufactured in South Africa.

First, of course, CFR has to get the deal done. In approving the capital increase, shareholders laid the cornerstone for a financing plan that also includes cash on hand and bank financing. "The transaction would be financed through the capital increase, as well as our own resources and long-term debt," CFR President Alejandro Weinstein said during the shareholder meeting (as quoted by Reuters).

Now, the deal has to pass muster with Adcock investors, some of whom aren't so sure about allowing a Chilean company to swoop in. As Reuters notes, South Africa's Public Investment Corporation owns about 14% of the company, and it has said it would prefer a buyout by a local company.

- see the Reuters news

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