Khotso Mokhele, chairman of Adcock Ingram, says South Africa's second largest generic drugmaker has spent years positioning itself for growth and isn't about to turn the rewards over to an opportunistic conglomerate trying to swoop in for the prize. That decision, however, may not be his to make.
Mokhele was speaking of Bidvest, a transportation and distribution company that last week made an unsolicited bid of 6.2 billion rand ($675.16 million) for a 60% share of Adcock. It gave the board a week to respond. On Tuesday the board dismissed the offer, citing the lack of details about any benefits Bidvest brought to a drug company, Reuters reported.
But Bidvest is not taking no for an answer. It didn't even wait for Adcock to respond before noting to shareholders that they were free to make up their own minds about Bidvest's offer. Mark Hodgson, an analyst at Cape Town-based Avior Research, pointed out to Bloomberg that Bidvest has a team of "experienced dealmakers" who aren't going to be dissuaded unless shareholders hold them up for an inflated price.
South Africa is the continent's largest economy and plans to phase in a national health plan over about 15 years that will rely heavily on generic drugs. Last year it awarded contracts for HIV and AIDS meds to drugmakers, including to Adcock Ingram and Aspen Pharmacare, the largest drugmaker in the country. Adcock's shares, however, have been underperforming those of Aspen and Cipla Medpro, the third largest generics maker. Mokhele told Reuters that was because the company has been investing in manufacturing capacity and distribution deals. "Over the last four years, we planted, the seeds are starting to germinate and we are set for harvesting hence we say the proposal is opportunistic," he said.
Control of Cipla Medpro is also in play. India's Cipla, which makes many of Cipla Medpro's drugs but owns only a small piece of the South African company, is trying to bump its interest to 51%. It recently raised its bid to about $500 million after shareholders rejected a lower offer. Meanwhile, Sandoz, the generic unit of Novartis' ($NVS), is expanding in the country, also aiming to tap the potential of a growing economy with an expanding national health plan.