Chilean branded generics major CFR Pharmaceuticals (Corporacion Farmaceutica Recalcine) is making a cash and shares offer to buy South African group Adcock Ingram in a deal valued at 12.90 billion rand, around $1.30 billion.
The Santiago-headquartered group is offering 73.51 rand per share (a premium of around 14% on its stock price on July 2 and says the deal would create "a global diversified emerging markets pharmaceuticals company [with] potential exposure to over two billion patients and …a presence in more than 23 countries". CFR is in discussion with a number of banks "which have expressed confidence" in funding the cash part.
CFR intends to roll out Adcock’s portfolio – which includes anti-retrovirals, over-the-counter treatments, plus diabetes, dermatology and ophthalmology medicines – in Latin America, while also gaining access to its markets in sub-Saharan Africa. A merger will also give Adcock "access to attractive new markets in Southeast Asia", through CFR's presence in Vietnam.
CFR says it can combine active pharmaceutical ingredient sourcing and use some of Adcock’s excess manufacturing capacity, thus reducing costs. It also does not envisage any job cuts, adding that "if if anything, the expectation is that the impact of the combination on employment will be positive".
Alejandro Weinstein, CFR chief executive, said the transaction "makes compelling commercial sense", saying it could unlock significant value through complementary product portfolios, business structures, geographical presence and manufacturing footprints". It would be accretive to CFR from year one.
Adcock received a 6.20 billion rand offer from South African services, trading and distribution company Bidvest to buy a 60% stake in March but the former said it had received other proposals and it clearly likes the look of CFR. Chairman of Adcock's independent board, Khotso Mokhele, claimed "there is a compelling rationale for a combination [which] would deliver value not only to shareholders, but also to employees and South Africa at large.”
He added that if the discussions lead to a merger, "it would represent a significant foreign direct investment into South Africa, enhancing South Africa’s reputation and profile as an attractive investment destination".