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UPDATE 2-South Africa's Adcock board to back $1.3 bln offer from Chile's CFR
September 11, 2013 / 2:48 PM / 4 years ago

UPDATE 2-South Africa's Adcock board to back $1.3 bln offer from Chile's CFR

* Deal a rare tie-up between Chile and South Africa

* CFR to pay as much as 47.29 rand in cash per share

* Chilean company to issue up to 15.44 new CFR shares per Adcock share

* Adcock shares rise more than 3 percent

By David Dolan and Rosalba O‘Brien

JOHANNESBURG/SANTIAGO, Sept 11 (Reuters) - The board of South African drugmaker Adcock Ingram on Wednesday said it would recommend a $1.3 billion cash and share offer from CFR Pharmaceuticals and the Chilean company promised to transfer jobs to help win Pretoria’s approval.

Although the deal was first proposed in July, there have been few details on how CFR would structure the bid or win support from the South African government, which has a history of scuppering cross-border takeovers.

The acquisition would mark a rare buyout of a South African company by a Chilean firm, and highlights the growing interest in healthcare and consumer spending in fast-rising economies.

“In sub-Saharan Africa we’re starting to see the same trend that we saw 20 years ago in Latin America,” Daniel Salvadori, a senior CFR executive, told a conference call, referring to rising wealth and consumer spending.

“We believe that Southeast Asia and sub-Saharan Africa are next.”

Adcock, known for its over-the-counter painkillers and cold medicines, has been the target of several other bids, although its board said CFR’s was the most attractive.

South African conglomerate Bidvest in March offered around $665 million to raise its 2.5 percent stake in Adcock to 60 percent, an offer Adcock dismissed as “opportunistic”.

Adcock Chairman Khotso Mokhele declined to give details of the other bids.

The drugmaker’s largest shareholder, the government owned Public Investment Corporation, has said it would prefer a local owner and is not in favour of exchanging Adcock shares for CFR shares.


In an example of its stance towards cross border acquisitions, South Africa last year rebuffed a $385 million offer from South Korea’s KT Corp for a stake in fixed-line operator Telkom SA, saying the company was important to its strategy of rolling out broadband to the poor.

“We’ve been engaging quite robustly with key ministries in government,” Mokhele said after the board issued a statement saying it favoured the deal.

“Those engagements have gone extremely well.”

In a move that could potentially smooth over government objections, CFR said it would transfer the manufacturing of certain products to South Africa, which would mean job creation in a country with an unemployment rate of over 25 percent.

The two companies said in a statement the deal would value Adcock shares at up to 75.92 rand a share.

Adcock’s shares rose 3.2 percent to 68.10 rand.

Adcock is currently trading at forward price-to-earnings ratio of 15.24, versus a sector median of 17.72, according to Thomson Reuters data.

CFR would pay as much as 47.29 rand in cash per Adcock share and issue up to 15.44 new CFR shares per Adcock share.

The deal, which would generate revenue and cost synergies of up to $440 million, would see Adcock delisted from Johannesburg, where CFR would have a secondary listing, the companies said.

Analysts have pointed to the potential for the two companies to sell their products in each others’ respective regions, with Adcock’s presence in HIV drugs and CFR’s oncology and complex injectables business of particular interest.

CFR - Corporacion Farmaceutica Recalcine - was set up in Chile by in 1922 by Ukrainian immigrant Nicolas Weinstein, whose grandson Alejandro Weinstein is currently CFR’s head.

In the 1990s it began to expand through the region and now has a presence in 16 Latin American countries.

Shares in CFR, which initially fell when it announced its plans to buy Adcock in early July, recovered and rose sharply in September, hitting 127,000 pesos on Monday, their highest level since March.

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