CFR Pharma presses emerging market ambitions with $1.3B Adcock bid

Chilean drugmaker CFR Pharmaceuticals has big plans. After snapping up a Colombian drugmaker late last year and raising $125 million in a bond issue, the company has made a $1.3 billion cash-and-share offer for South Africa's Adcock Ingram.

It's a bid to become a global drugmaker focused on emerging markets, CFR said in a release. By adding Adcock to its operations, CFR would have a beachhead in 23 countries in Africa, Latin America, Southeast Asia and Europe. Combined, the companies would generate revenue of about $1.3 billion.

CFR figures it can leverage Adcock's portfolio of HIV fighters and over-the-counter remedies into big growth in Latin America and funnel its own branded generics into Adcock's distribution network in South Africa and other African countries. CFR posted 2012 sales of $570.8 million, up 16.3% year over year.

Plus, CFR says it could cut costs by using Adcock's excess manufacturing capacity and combining the two companies' API purchases. As for other cost savings, CFR says it "has no plans" to cut Adcock's payroll; in fact, the company figures employment at Adcock's 18 manufacturing plants will eventually grow as production steps up.

"This is an exciting opportunity to deliver real benefits … through the combination of CFR and Adcock Ingram leading to increases in exports and job opportunities for South Africa," CEO Alejandro Weinstein said in a statement.

CFR says it would use cash on hand and bank financing to cover the cash portion of the deal, with a new share issue--$750 million worth, or 3 billion new shares--covering the rest. The company scheduled an extraordinary shareholders meeting to allow a vote on the new shares.

Adcock appears to be receptive to the deal, which, at 73.51 rand per share, offers a 14% premium to its closing price on Tuesday. Independent director Andrew Thompson told Bloomberg that the bid "has a compelling rationale from an emerging market point of view. There is no other South African company that could have offered this combination."

But there's at least one other possible suitor waiting in the wings. Back in March, the industrial conglomerate Bidvest made an unsolicited offer of 62.50 rand per share. Adcock spurned the offer, but other buyers were said to be circling, including Sanofi ($SNY).

- see the release from CFR
- get more from Bloomberg

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