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The Adjourned General Meetings, Pro Forma Financial Effects and Renewal of Cautionary Announcement
Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2007/016236/06
Share code: AIP
ISIN: ZAE000123436
(“Adcock Ingram” or “the Company”)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO
WOULD CONSTITUTE A VIOLATION OF APPLICABLE LAW OR REGULATION
THE ADJOURNED GENERAL MEETINGS, PRO FORMA FINANCIAL EFFECTS
AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Adcock Ingram shareholders are referred to the announcements released on the Stock Exchange New Service on
Friday, 13 December 2013 and Wednesday, 18 December 2013 and published in the South African press on
Tuesday, 17 December 2013 and Thursday, 19 December 2013, respectively, which referred to, inter alia, the
intention by CFR Pharmaceuticals S.A. (“CFR”) to increase the total consideration payable to the holders of
Adcock Ingram ordinary shares in terms of the scheme of arrangement proposed between Adcock Ingram and
Adcock Ingram ordinary shareholders (other than the ordinary shares held by Adcock Ingram’s wholly owned
subsidiary) (“the Revised Offer”) (“the Scheme”) and the adjournment of the Combined General Meeting and the
Ordinary General Meeting (“the General Meetings”) convened on Wednesday, 18 December 2013.
2. THE ADJOURNED GENERAL MEETINGS
Due to regulatory approval of the relevant shareholder documentation taking longer than anticipated in
December 2013, the adjourned General Meetings are now likely to resume in mid-February 2014. Shareholders
will be notified of the revised salient dates and times in a further announcement.
3. PRO FORMA FINANCIAL EFFECTS OF THE REVISED OFFER ON ADCOCK INGRAM ORDINARY SHAREHOLDERS
The table below sets out the pro forma financial effects of the Scheme on Adcock Ingram Ordinary Shareholders,
for which the directors of Adcock Ingram are responsible, based on the results of Adcock Ingram for the year
ended 30 September 2013 and the assumptions set out below the table. The pro forma financial effects have
been prepared for illustrative purposes only, in order to provide information on how the Scheme may affect the
basic earnings per share (“EPS”), diluted earnings per share (“DEPS”), headline earnings per share (“HEPS”) and
diluted headline earnings per share (“DHEPS”) of the Adcock Ingram Ordinary Shares exchanged for new shares
in CFR (“CFR Shares”), assuming the Scheme had become operative on 1 October 2012, and for the purposes of
net asset value per share (“NAVPS”) and net tangible asset value per share (“NTAVPS”) as if the Scheme had
become operative on 30 September 2013. Due to their nature, the pro forma financial effects may not give a
true reflection of the financial effects of the Scheme. Adcock Ingram Ordinary Shareholders should note that the
table below does not take account of the potential revenue and cost synergy effects or the cash impact that
have been identified if the Scheme is implemented.
Adcock Ingram Ordinary Shareholders should not base any investment decision solely on the information
provided in this paragraph. The table below compares one Adcock Ingram Ordinary Share pre Scheme
implementation to one CFR Share post Scheme implementation. Adcock Ingram Shareholders should take into
consideration the number of CFR Shares to be received as a result of the Scheme implementation for one Adcock
Ingram Ordinary Share currently held and the cash element of the proposed transaction when considering the
information below.
Shareholders are cautioned that due to their nature, the pro forma financial effects may not fairly present the
actual financial effects of the Revised Offer. Shareholders are reminded that, according to the Scheme, one
Adcock Ingram Ordinary Share is equivalent to approximately 31.9 CFR Shares for the purposes of the pricing of
the Scheme Consideration. Therefore, Adcock Ingram shareholders are cautioned when comparing CFR Shares
and Adcock Ingram Ordinary Shares on a like-for-like basis as depicted below. In addition, shareholders should
note that the table below does not take account of the potential revenue and cost synergy effects or the cash
impact that have been identified if the Scheme is implemented:
Pro forma financial information to 30 September 2013
Before the After the
Scheme Scheme Percentage
(ZAR) (ZAR) change
EPS 3.49 0.041 (98.8)
DEPS 3.48 0.041 (98.8)
HEPS 3.51 0.041 (98.8)
DHEPS 3.50 0.041 (98.8)
NAVPS 22.32 1.19 (94.7)
NTAVPS 13.81 (0.44) (103.2)
Weighted average number of shares in issue (‘000) 168,618 11,134,957
Shares in issue at period-end (‘000) 168,328 11,134,957
Diluted number of shares (‘000) 168,753 11,213,625
Notes:
The pro forma financial information assumes a minimum of 50.3% of the Scheme Consideration will be settled
in cash and a maximum of 49.7% of the Scheme Consideration will be settled in CFR Shares. All assumptions
made with respect to the Scheme Consideration allocation and deal structure are preliminary and, therefore,
subject to change once the Scheme Consideration allocation and deal structure have been finalised.
1. The financial information in the “Before the Scheme” column was arrived at by using the Adcock Ingram
profits and number of shares as published for the year ended 30 September 2013.
2. The financial information included in the “After the Scheme” was taken into account by using the new
consolidated profits of CFR and the new number of CFR Shares that will be in issue, after the implementation
of the Scheme.
3. All income statement information was converted at an average exchange rate of ZAR9.31 to US$1.
4. All balance sheet information was converted at the closing exchange rate at 30 September 2013 of ZAR10.05
to US$1.
5. The CFR Group (being CFR and its subsidiaries) financial information has been extracted, without
adjustment, from the CFR Group’s audited financial statements for the year ended 31 December 2012.
6. The Adcock Ingram Group (being Adcock Ingram and its subsidiaries) financial information has been
extracted from the Adcock Ingram Group audited financial statements for the year ended 30 September
2013. This financial information has been adjusted for:
a. Conversion from South African Rands to US dollars; and
b. Compliance with CFR Group accounting policies.
7. The Scheme Consideration will be funded by bank debt amounting to US$600 million and by the issue of new
CFR Shares to the value of US$622 million (2 718 957 000 new shares) and US$30 million from own
resources as reflected in the pro forma statement of financial position. An interest rate of 6% per annum is
assumed, based on current interest rates payable by the CFR Group (included Chilean taxation of 20%),
which is of a continuing nature.
8. Non-recurring CFR transaction costs amounting to US$39,4 million are being incurred of which US$19,2
million has been expensed through the statement of comprehensive income. These costs are assumed to be
tax deductible in Chile (US$7,9 million). However due to the tax timing difference relating to the realisation
of debt issuance costs, taken into account in determining the effective interest rate of the debt raised for the
transaction a deferred tax liability (US$3,2 million) has been recognised resulting in to net transaction costs
of US$14,5 million. These costs will be paid out of available cash resources and are attributable to various
professional advisers, regulatory authorities and printing costs. The balance of the costs consist of debt
issuance costs of US$15,9 million and have been taken into account in determining the effective interest rate
of the debt portion of the Scheme Consideration. US$4,3 million issuance costs relating to the capital stock
increase have been set off against equity in the pro forma statement of financial position.
Non-recurring Adcock Ingram transaction costs amounting to US$15,6 million are being incurred, which has
been expensed through the statement of comprehensive income. These costs are assumed not to be tax
deductible in South Africa, therefore no tax effect was included.
In addition CFR will incur US$29.2 million for hedge contracts related to the acquisition.
9. In terms of the requirements of IFRS 3 and based on CFR Group management’s best estimate, the excess of
the Scheme Consideration to be paid to Adcock Ingram Ordinary Shareholders over the net asset value at
1 January 2012 has been allocated as follows:
Year of
Amount amortisation 12 months
01.01.2012 comprehensive amortisation
ThUS$ income statement ThUS$ Adjustment
Inventories 26.987 1 (26.987) Cost of sales
Intangible (brand and products) 27.601 20 (1.380) Selling and Admin
PP&E 4.546 20 (228) Selling and Admin
Intangible (licenses) 3.800 15 (253) Selling and Admin
Intangible (client relationships) 281.600 20 (14.080) Selling and Admin
Total (42.928)
Income tax effects (28% tax rate) 12.020 Taxation
10. In terms of the Share Option Scheme, outstanding Share Options as at the Scheme Implementation Date will
be redeemed at a price of R74.5 per Adcock Ingram Ordinary Share. The number of Share Options
outstanding as at 30 September 2013 amount to 3,868,514. The early redemption of the Share Options
results in an additional liability of US$4,7 million as at the acquisition date. The net result after tax on the
statement of comprehensive income is the recognition of an additional expense of US$3,4 million, assuming
a South African tax rate of 28% (selling and administrative expenses US$4,7 million, taxation US$1,3 million).
4. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement and renewals thereof dated 2 December 2013, 3 December 2013,
4 December 2013, 13 December 2013 and 18 December 2013, respectively, released by the Company,
shareholders are advised to continue exercising caution when dealing in the Company’s securities until a further
announcement is made.
5. RESPONSIBILITY STATEMENTS
The Adcock Ingram Independent Board accepts responsibility for the information contained in this
announcement insofar as it relates to Adcock Ingram. To the best of their knowledge and belief, the information
contained in this announcement which relates to Adcock Ingram is true and this announcement does not omit
anything likely to affect the importance of such information.
The Adcock Ingram Board accepts responsibility for the information contained in this announcement insofar as it
relates to Adcock Ingram. To the best of their knowledge and belief, the information contained in this
announcement which relates to Adcock Ingram is true and this announcement does not omit anything likely to
affect the importance of such information.
For Adcock Ingram media enquiries:
Brunswick
Tel: +27 11 502 7300
Carol Roos
+27 72 690 1230
Marina Bidoli
+27 83 253 0478
Midrand
9 January 2014
Sponsor to Adcock Ingram
Deutsche Securities (SA) Proprietary Limited
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