One of the key drivers behind the pursuit of South Africa's Adcock Ingram by Brazil's CFR Pharmaceuticals has been to get it hands on excess manufacturing capacity in South Africa. By consolidating their manufacturing operations, CFR expects big cost savings. Now that the two say the deal is all but done, the combination will soon go forward.
"We have committed to growing Adcock's business and plan to transfer a number of products to Adcock's South African and Indian factories, which would help drive job creation and exports," CFR's CEO Alejandro Weinstein said as the two companies announced Wednesday they had agreed on terms. "Together, our combined businesses are expected to generate significant revenue and cost synergies, with an estimated net present value of approximately R4.4 billion ($440 million). We would be uniquely positioned to capitalize on attractive market opportunities in South America, Africa and South East Asia."
Some of those savings are expected to come from combining their drug and API manufacturing. CFR earlier said it has no plans to cut jobs at the combined 18 manufacturing facilities. "This is expected to have a positive effect on long-term employment and will drive exports from South Africa, in line with the South African government's strategic objectives for the country, as well as CFR's commitment to preserve and grow jobs within Adcock Ingram," it said.
CFR will pay R12.6 billion ($1.3 billion) in cash and shares for Adcock, which they said is a 31% premium to Adcock's current share price. CFR has also nailed down an agreement with Baxter International for it to take over the hospital products that Adcock currently sells for Baxter.
As Bloomberg points out, to get the deal done, CFR had to outmaneuver London-based private equity firm Actis LLP and Bidvest Group, a Johannesburg-based food and car sales company that made a run at Adcock. This is the second big deal for CFR in less than a year. In December it acquired Laboratorio Franco Colombiano Lafrancol SAS for $560 million, giving it the biggest share of the Colombian market.
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