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Cautionary announcement regarding a non-binding offer from CFR Pharmaceuticals S.A.
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”)
CAUTIONARY ANNOUNCEMENT REGARDING A NON-BINDING OFFER FROM CFR
PHARMACEUTICALS S.A. (“CFR”) THAT COULD RESULT IN A CASH AND SHARES
OFFER TO ACQUIRE 100% OF THE ISSUED SHARE CAPITAL OF ADCOCK INGRAM
BY WAY OF A SCHEME OF ARRANGEMENT AND THEREBY CREATE A GLOBAL
EMERGING MARKETS PHARMACEUTICALS COMPANY WITH A PRESENCE ON FOUR
CONTINENTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
KEY FEATURES*
- The Independent Board of Adcock Ingram has entered into
discussions with CFR
- Potential cash and shares offer to acquire the entire issued share
capital of Adcock Ingram by way of a scheme of arrangement
- Potential comparable offers to Adcock Ingram’s broad-based black
economic empowerment partners as well as the participants in the
Company’s employee incentive schemes
- Potential offer price of ZAR73.51 per Adcock Ingram ordinary share
to be settled in cash and new CFR ordinary shares
- Creation of a leading diversified emerging markets pharmaceuticals
company treating over two billion potential patients in Africa,
Latin America, Europe, South East Asia and India
- CFR to seek a secondary listing on the JSE
* Capitalised terms used in this section have the same meaning as
ascribed in this announcement
1. INTRODUCTION
Shareholders are referred to the announcements released by the
Company on SENS on 9 May and 31 May 2013 in which the independent
board of directors of Adcock Ingram (“Independent Board”) advised
Adcock Ingram shareholders that it had received and was in the
process of evaluating non-binding proposals to acquire 100% of or a
controlling interest in the Company's securities and had established
a confidential process to engage with the potential offerors
concerned.
The Independent Board is pleased to advise Adcock Ingram
shareholders that the Company has entered into discussions with CFR
regarding a non-binding offer that could lead to CFR making a cash
and shares offer to acquire the entire issued ordinary share capital
of the Company by way of a scheme of arrangement at a potential
offer price of ZAR73.51 per Adcock Ingram ordinary share (“the
Potential Offer Price”), as well as making comparable offers to
Adcock Ingram’s black economic empowerment partners, as holders of
all of Adcock Ingram’s issued A and B ordinary shares, and the
participants in the Company’s employee incentive schemes (“the
Potential Offer”).
If the Potential Offer is made, CFR proposes to settle the Potential
Offer Price by way of a mix of cash and new CFR ordinary shares. The
Potential Offer Price is therefore not fixed and remains subject to
movements in the relevant exchange rates and the price of listed CFR
ordinary shares on the Santiago Stock Exchange. The cash portion of
the aggregate Potential Offer Price is proposed to be settled
through a combination of cash-on-hand and debt financing and CFR has
delivered a highly confident letter from its financing banks to the
Independent Board in support of these financing arrangements. The
share portion of the aggregate Potential Offer Price is proposed to
be settled through a fresh issue of new CFR ordinary shares via a
capital raising process in Chile to be initiated imminently. CFR
will seek a secondary listing on the Johannesburg Stock Exchange
(“JSE”) to take place in conjunction with the implementation of the
Potential Offer. The combined company would therefore benefit from a
broader global investor base with listings in both Johannesburg and
Santiago, Chile.
Shareholders are advised that the Potential Offer does not
constitute a firm intention to make an offer as contemplated in
Chapter 5 of the Companies Act, No 71 of 2008 (“Companies Act”) or
the Companies Regulations, 2011 (“Companies Regulations”). The
making of the Potential Offer by CFR is subject to the fulfilment of
a number of pre-conditions including, inter alia, satisfactory
completion of confirmatory due diligence and Adcock Ingram and CFR
reaching agreement on the terms of the Potential Offer. In order to
satisfy these pre-conditions, a period of exclusivity has been
granted by Adcock Ingram to CFR.
The Independent Board has appointed JPMorgan Chase Bank, N.A.
(Johannesburg Branch) (“JPMorgan”) as independent expert in terms of
regulation 90 of the Companies Regulations. In the event that a firm
intention to make an offer is received from CFR, the Independent
Board will obtain a fair and reasonable opinion from JPMorgan in
respect thereof and express a view to Adcock Ingram shareholders.
2. STRATEGIC RATIONALE FOR THE POTENTIAL OFFER
2.1 Overview of CFR
CFR is a multinational emerging markets pharmaceutical company based
in Chile. Founded in 1922 by Mr. Nicolas Weinstein, CFR is today
managed by a third generation of the Weinstein family, Mr. Alejandro
Weinstein.
Since 1990, CFR has successfully expanded beyond Chile into other
countries in Latin America and other emerging markets. Today, CFR
employs over 7,000 people including a sales force comprising nearly
2,000 sales representatives. CFR has market leading operations in
Chile, Peru and Colombia, as well as a presence in Venezuela,
Argentina, Bolivia, Paraguay, Ecuador, Costa Rica, Panama, El
Salvador, Nicaragua, Honduras and the Dominican Republic. In
addition, CFR has operations in North America and Europe through its
Canadian subsidiary Uman Pharma and its United Kingdom subsidiary
Allergy Therapeutics respectively. CFR also has a presence in South
East Asia through its manufacturing hub and commercial affiliate in
Vietnam. In 2012, CFR generated revenues of US$757 million, which
includes the recent Lafrancol acquisition.
CFR’s business model is focused on the development, manufacture and
commercialisation of off-patent and locally unpatented branded
specialty pharmaceutical products. CFR is present in a number of
business segments, including, Drugtech (neurology, psychiatry and
cardiology), Gynopharm (women’s health), Recalcine (acute
therapeutic areas), Biomedical Sciences (monoclonal antibodies and
treatments related to transplants, dialysis, oncology and
rheumatology) and Complex Injectables (sterile injectable products
and lyophilized forms, for anaesthesia, infectious diseases,
cardiology and critical care) amongst others.
In 2011, CFR successfully completed its initial public offering on
the Santiago Stock Exchange, which was more than 10 times
oversubscribed, transforming CFR into the only publically traded
pan-Latin American pharmaceutical company.
2.2 Strategic rationale for the Potential Offer
The combination of Adcock Ingram and CFR would:
- create a leading diversified emerging markets pharmaceuticals
company with a presence in more than 23 countries and employing more
than 10,000 people;
- have revenues of approximately US$1.3 billion (approximately
ZAR12.1 billion) and an asset base of approximately US$2.1 billion
(approximately ZAR19.5 billion);
- benefit from access to high-growth markets, an expanded
manufacturing footprint and a complementary product portfolio;
- be well positioned to explore other attractive emerging market
opportunities; and
- have the potential to generate substantial revenue and cost
synergies over time.
2.3 Potential benefits arising from the combination for both Adcock
Ingram and CFR
- Manufacturing: CFR will seek to use excess manufacturing capacity
available in the combined group to optimise utilisation and reduce
costs. In this regard, CFR plans to transfer the manufacture of
certain products to South Africa and India. Through the combination,
Adcock Ingram will seek to lower its cost of production by
increasing volumes and utilisation rates.
- Sourcing: Adcock Ingram and CFR will seek to combine their active
pharmaceutical ingredient sourcing and procurement.
– Product portfolio: CFR will seek to add to Adcock Ingram’s
existing product portfolio in sub-Saharan Africa. In addition,
through its Complex Therapeutics Division, CFR will provide Adcock
Ingram with access to new therapeutic areas. CFR should benefit from
rolling out Adcock Ingram’s portfolio in Latin America. In
particular, CFR believes that significant opportunities exist in its
home markets in the areas of antiretroviral and over-the-counter
(“OTC”) medicines. The OTC market in Latin America is a US$12
billion market growing at a compound annual growth rate of
approximately 12% and represents an attractive opportunity for
Adcock Ingram’s OTC portfolio. Adcock Ingram should also help CFR
grow its presence in Diabetes, Dermatology and Ophthalmology.
- Geographic footprint: The combined company will have a unique
footprint in emerging markets. CFR should give Adcock Ingram access
to attractive new markets through its presence in Latin America as
well as South East Asia. Adcock Ingram’s regional presence will give
CFR access to the South African market and other markets in sub-
Saharan Africa.
2.4 Potential benefits for South Africa
- Investment in manufacturing: Adcock Ingram’s current manufacturing
facilities will play a key role in the combined group. By moving
certain production to South Africa, the combination should give rise
to additional investment in manufacturing in South Africa with a
resultant positive effect on long-term employment and exports for
South Africa.
- Direct foreign investment: The Potential Offer would represent a
significant direct investment into South Africa. Through the
proposed secondary listing of CFR on the JSE, the transaction should
enhance South Africa’s reputation and profile as an investment
destination.
- Broad-based black economic empowerment: CFR understands the
importance of broad-based black economic empowerment and has
indicated that it is committed to ensuring that Adcock Ingram
remains appropriately empowered.
- Branding: CFR plans to preserve the Adcock Ingram brand and grow
it beyond South Africa.
3. RENEWAL OF CAUTIONARY ANNOUNCEMENT
The Independent Board cautions shareholders that there is still no
certainty at this stage that a firm offer will either be proposed or
implemented. The Potential Offer may, however, have a material
effect on the price of the Company’s securities. Accordingly,
shareholders are advised to exercise caution when dealing in the
securities of the Company until a further announcement is made.
For media enquiries:
Brunswick
Tel: +27 11 502 7300
Carol Roos
+27 72 690 1230
Marina Bidoli
+27 83 253 0478
Midrand
3 July 2013
Financial adviser to Adcock Ingram
Deutsche Bank
Legal adviser to Adcock Ingram
Read Hope Phillips Attorneys
Public relations adviser to Adcock Ingram
Brunswick
Sponsor to Adcock Ingram
Deutsche Securities (SA) Proprietary Limited
Financial adviser to CFR
Credit Suisse
Legal adviser to CFR
Bowman Gilfillan
Public relations adviser to CFR
College Hill
Deutsche Securities (SA) Proprietary Limited (“Deutsche Bank”), a
non-bank member of the Deutsche Bank Group, is acting for Adcock
Ingram and no one else in connection with the Proposed Offer and
will not be responsible to anyone other than Adcock Ingram for
providing the protections afforded to clients of Deutsche Bank or
for providing advice in relation to the Potential Offer.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements within this announcement may be considered
forward looking. Although Adcock Ingram believes that the
expectations reflected in such forward looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. Adcock Ingram does not undertake any obligation
to publicly update or revise any of the information given in this
announcement that may be deemed to be forward looking.
Date: 03/07/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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