Top Adcock shareholder nixes CFR offer, endangering $1.3B deal

So close and yet too far: Chile-based CFR Pharmaceuticals has hit a wall in its quest to buy the South African drugmaker Adcock Ingram. Though leading Adcock shareholders had backed the $1.3 billion deal, the company's largest investor--the state-backed pension fund manager Public Investment Corp. (PIC)--said no go. One of the sticking points is CFR's base outside the country.

South African officials have expressed reservations about the deal ever since CFR made its 73.51-rand-per-share offer. As one of the country's leading drugmakers, Adcock is also a key supplier of remedies for South African patients and an important employer. The concern was that a foreign buyer might move facilities, cut jobs, or reduce supplies of needed drugs.

Still, analysts had expected PIC to end up backing the cash-and-stock deal. Not so. PIC said yesterday that its management and investment committee came to a "unanimous decision that it was not in the best interest of its shareholding to support the CFR offer in its current form."

And given the fact that PIC controls 18.6% of Adcock, its opposition to the deal could scuttle it altogether. CFR says 45% of Adcock shareholders support the buyout, but it needs 75% to make it happen. Another major shareholder, Foord Asset Managers with 10% of the company, has yet to decide.

There's still hope for CFR, however. As some analysts point out, PIC's refusal may be a last-ditch negotiating tactic. Some investors have been wary of the stock portion of CFR's bid because they see the Chilean company's shares as overvalued. They'd prefer an all-cash deal. Analysts told BusinessDay in Johannesburg that CFR and Adcock might rework the deal to put more cash into the mix--perhaps even reduce CFR's ownership stake so that a share of the company could remain with local ownership.

"It is a good negotiating move," 36One Asset Management analyst Jean Pierre Verster told the news outlet. "This is not the end of the deal. I would hope CFR and Adcock are open to restructuring the deal."

- read the BusinessDay story

Special Report: Top 10 Drugmakers in Emerging Markets

Suggested Articles

Turns out Procter & Gamble didn’t want Pfizer’s consumer health unit after all. But it did want Merck KGaA’s.

Private equity firm, in exclusive talks with Sanofi, says it'll invest to pump up Zentiva into an "independent European generics leader."

With suitor Takeda circling Shire, the Dublin-based target has pulled off a deal of its own.