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Brian Joffe expects PIC to reject Adcock offer

Adcock shares trade above bid price

The chief executive of South Africa’s Bidvest Group said his $515 million buyout offer for Adcock Ingram is likely to be rejected by a major shareholder, meaning the industrial conglomerate could end up with less than 100 percent.

Bidvest, a group spanning car showrooms, shipping and catering, offered R52 per share for the stock it does not already own in Adcock in a mandatory bid after offering to buy out three investors with a combined 13% stake.

Buying an additional 13 percent in the nation’s No.2 drug-maker would increase Bidvest’s holding to at least 47.5% from 34.5%.

Under South Africa’s capital markets law, if a shareholder buys more than 35% of a company it must make an offer for the remaining shares on similar terms. However, the remaining shareholders can reject the offer without jeopardising Bidvest’s intention of lifting its stake above the buyout threshold.

Shares in Adcock have shot past the mandatory offer price in recent days, fuelling speculation that some shareholders believed Bidvest bid was too low.

The rising share prices means that state-owned pension fund Public Investment Corporation’s (PIC), the second-biggest shareholder in Adcock with a 25 percent stake, may turn down the buyout bid, Bidvest founder and chief executive Brian Joffe told the Reuters Africa Investment Summit.

“Judging by where (the) Adcock share price is now, we are not going to get too many shares,” Joffe said. “I really don’t think the PIC will be selling their shares.”

Shares in Adcock gave up their gains in afternoon trade but were still above the bid price. The stock was down 0.4% at R52.27, after earlier rising as high as R53.50.

Bidvest, which reported an increase in earnings on Monday, has been trying to take control of Adcock since 2013, to add painkillers and cough syrups to its products.

It acquired its 34.5% stake at R70 per share to block a rival bid from Chile’s CFR Pharmaceuticals.

Adcock is trailing rivals as it struggles with slowing sales, over-reliance on a heavily regulated home market and factories that are running below capacity.

“Adcock has made investments in Ghana and India, which are under-performing. Those are some of the things that need to be dealt with,” said Joffe, one of South Africa’s top dealmakers.

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