CFR Pharmaceuticals bid for Adcock Ingram

Last Thursday there was a cautionary announcement by Adcock Ingram that CFR Pharmaceuticals had made a non-bidding offer.

The reaction witnessed was somewhat lukewarm with initial upward momentum in the share price that was short lived, falling back to previous day levels in play ahead of the announcement. CFR Pharmaceuticals is not well known to South African investors as it is a South American based company.

Adcock is no stranger to acquisition talk as in March there were headlines about local industrial giant Bidvest putting in an offer for a 60% stake in the company at R62,00 per share. The bid was rejected however, on technical grounds cited by Adcock.

This current bid is an improvement on the Bidvest offer, R73.51 per share but the stake is much higher at 100%. If the deal goes through, Adcock Ingram will be delisted and absorbed into CFR Pharmaceuticals which will in turn seek a secondary listing on the JSE.

It is important to remember that it is up to the key shareholders to make the decision, one of which is the PIC (Public Investment Corporation), Adcock's biggest shareholder, which said in May earlier this year that they would favour a domestic buyout. PIC chief investment officer Dan Matjila was quoted saying that “Shareholder returns have to be balanced with social returns and what is important for South Africa at large”. It is still early on in the process and it comes as no surprise that investors are eagerly waiting for the story to unfold.

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