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Joint detailed terms and cautionary announcement regarding a potential cash and shares offer by CFR
Adcock Ingram Holdings Limited CFR Pharmaceuticals S.A.
(Incorporated in the Republic of South Africa) (Incorporated in the Republic of Chile)
Registration number: 2007/016236/06 Chilean Tax ID: 76,116,242-K
Share code: AIP Securities Regulation Registry number: 1067
ISIN: ZAE000123436 Share code: CFR
(“Adcock Ingram” or “the Company”) ISIN: CL0001762831
(“CFR”)
JOINT DETAILED TERMS AND CAUTIONARY ANNOUNCEMENT REGARDING A POTENTIAL CASH AND SHARES OFFER BY CFR TO
ACQUIRE 100% OF THE ISSUED SHARE CAPITAL OF ADCOCK INGRAM, OTHER THAN THE ISSUED A AND B ORDINARY SHARES
(“BOPHELO SCHEME SHARES”) AND ANY ORDINARY SHARES HELD BY SUBSIDIARIES OF THE COMPANY (“TREASURY SHARES”), BY
WAY OF A SCHEME OF ARRANGEMENT (“POTENTIAL OFFER”)
KEY FEATURES*
* The boards of directors of Adcock Ingram and CFR are pleased to announce that Adcock Ingram and CFR have reached agreement
regarding the proposed terms and conditions of the Potential Offer
* The proposed combination of Adcock Ingram and CFR will create a uniquely diversified emerging markets pharmaceuticals company with
listings in Santiago and Johannesburg, targeting a market of over two billion patients across Latin America, Africa, South East Asia and
India. The combination of CFR and Adcock Ingram is anticipated to generate significant revenue and cost synergies, with an estimated net
present value at least US$440 million (approximately ZAR4.4 billion)
* Adcock Ingram will be an integral part of the combined business, generating up to 40% of group revenue. CFR is committed to growing
Adcock Ingram’s business in South Africa and Africa, transferring manufacturing capacity to South Africa, preserving and growing jobs and
maintaining Adcock Ingram’s commitment to broad-based black economic empowerment
* The Proposed Offer Consideration equates to:
- ZAR73.51, based on an attributed value of ZAR2.334 per New CFR Share, representing a premium of 31% to the unaffected
closing price of Adcock Ingram ordinary shares on the JSE as at 20 March 2013 of R56.20; and
- ZAR75.92 based on the current Rand equivalent closing price of CFR shares as at 10 September 2013 of ZAR2.49 and based on
the minimum cash and maximum number of New CFR Shares per the Proposed Offer Mix
* The total Proposed Offer Consideration of approximately ZAR12.6 billion (approximately US$1.26 billion) is to be settled partly in cash
and partly in New CFR Shares as follows:
- a minimum of 51.0% and up to a maximum of 64.3% to be settled in cash in South African Rand (equating on an aggregate basis to
a minimum of ZAR37.49 and up to a maximum of ZAR47.29 per Adcock Ingram Ordinary Share)
- a minimum of 35.7% and up to a maximum of 49.0% to be settled in New CFR Shares (equating on an aggregate basis to a
minimum of 11.24 and up to a maximum of 15.44 New CFR Shares per Adcock Ingram Ordinary Share based on an attributed
value of ZAR2.334 per New CFR Share)
- Finalisation of the Proposed Offer Mix is subject to completion of the CFR Capital Increase in Chile
- Adcock Ingram Ordinary Shareholders to be offered a Mix-and-Match Facility allowing them to elect to receive a greater
proportion of New CFR Shares or cash
- Adcock Ingram to be delisted and CFR to be listed on the JSE by way of a secondary listing
* CFR has concluded non-binding memoranda of understanding with the holders of the Bophelo Scheme Shares regarding the retention
and future involvement of the BEE shareholders in Adcock Ingram. The Bophelo Scheme Shares equate to approximately 14% of the
enlarged issued Adcock Ingram shares
CFR has concluded a non-binding memorandum of understanding with Baxter regarding arrangements to maintain the existing licensing,
distribution and supply arrangements in respect of Adcock Ingram’s Hospital Products Division
* CFR has completed its due diligence review of Adcock Ingram. Subject to the fulfilment or waiver of the Pre-conditions referred to in
paragraph 9 of this announcement, CFR will make the Potential Offer
* The Independent Board is of the view that the Potential Offer is the most favourable proposal received to date in terms of proposed offer
price, conditionality, strategic rationale, future value creation potential for Adcock Ingram shareholders and execution risk. The
Independent Board intends, subject to the fulfilment of the Pre-conditions and receipt of a favourable independent expert opinion, to
recommend to Adcock Ingram shareholders to vote in favour of all resolutions required to implement the Potential Offer
* Adcock Ingram shareholders are advised that the Potential Offer may have a material effect on the price of the Company’s securities.
Accordingly, shareholders should continue exercising caution when dealing in the Company’s securities
* Capitalised terms used in this section have the same meaning as ascribed in this announcement
1. INTRODUCTION
Shareholders of Adcock Ingram and CFR are referred to the announcements released by the Company on SENS on 3 July 2013 and 15 August
2013 in which the independent board of directors of Adcock Ingram (“the Independent Board”) notified Adcock Ingram shareholders that the
Company had entered into discussions with CFR regarding a non-binding offer that could lead to CFR making a cash and shares offer to acquire
100% of the issued share capital of Adcock Ingram (other than the Bophelo Scheme Shares and the Treasury Shares), by way of a scheme of
arrangement in terms of section 114 of the Companies Act 71 of 2008 (“Companies Act”) (“the Scheme”).
The boards of directors of Adcock Ingram and CFR are pleased to advise that Adcock Ingram and CFR have entered into a transaction
implementation agreement (“TIA”) regarding the Potential Offer. The TIA sets out the basis on which CFR will, subject to the fulfilment or
waiver of the Pre-conditions, make an offer to acquire all of the Adcock Ingram shares (other than the Bophelo Scheme Shares and the
Treasury Shares) (“Adcock Ingram Ordinary Shares”) held by Adcock Ingram ordinary shareholders (“Adcock Ingram Ordinary Shareholders”)
under the Scheme.
The TIA regulates the proposal and implementation of the Scheme, and includes, inter alia:
1.1. the Pre-conditions (referred to in paragraph 9 below) to the Independent Board proposing the Scheme and CFR making the Potential
Offer;
1.2. the suspensive conditions to the Scheme (referred to in paragraph 10 below), if the Potential Offer is made;
1.3. customary reciprocal undertakings given by each party to the other in relation to the implementation of the Scheme, including the
proposal of the Scheme, completion of the CFR Capital Increase (referred to in paragraph 3 below), implementation of the secondary
listing of the entire issued share capital of CFR, including the New CFR Shares, on the Main Board of the securities exchange operated by
JSE Limited (“JSE”) and the conduct by each party of its business up until the operative date of the Scheme;
1.4. certain governance matters, in accordance with the Chilean Corporations Act (Law 18,046); and
1.5. certain non-solicitation and other undertakings.
South African law provides for a system of broad-based black economic empowerment, which is a central part of the South African
government’s transformation strategy. CFR is aware of how critical it is to a company’s ability to operate successfully in South Africa that it
advances broad-based black economic empowerment. CFR has accordingly entered into a non-binding memorandum of understanding with
each of Blue Falcon 69 Trading (Proprietary) Limited (“Blue Falcon”) and the trustees of the Mpho ea Bophelo Trust (“Bophelo Trust”)
regarding the retention and future involvement of the Company’s black empowerment (“BEE”) shareholders. Together, Blue Falcon and the
Bophelo Trust hold the Bophelo Scheme Shares, which shares equate to approximately 13% of all of the issued Adcock Ingram shares. It is also
contemplated in the TIA that participants in each of the Company’s two employee incentive schemes will benefit from either the exercise of
their existing options in order to participate in the Scheme or the making by CFR of an equitable offer, as the case may be.
Shareholders are advised that this announcement does not constitute a firm intention announcement in terms of Regulation 101 of the
Takeover Regulations. On fulfilment or waiver of the Pre-conditions, the TIA will constitute notification of a firm intention by CFR to make an
offer to the Adcock Ingram Ordinary Shareholders, as contemplated in Chapter 5 of the Companies Act and Chapter 5 of the Companies
Regulations, 2011 published in terms of section 223, and Item 14 of Schedule 5, of the Companies Act (“Company Regulations”). The Company
and CFR will publish a joint firm intention announcement at that time.
2. PROPOSED OFFER CONSIDERATION AND PROPOSED OFFER MIX
The total proposed offer consideration (“Proposed Offer Consideration”) of approximately ZAR12.6 billion (approximately US$1.26 billion) is to
be settled partly in cash in South African Rand and partly in new CFR shares to be issued by CFR pursuant to the CFR Capital Increase and listed
on the JSE (“New CFR Shares”) (“Proposed Offer Mix”) as follows:
2.1. a minimum of 51.0% and up to a maximum of 64.3% to be settled in cash in South African Rand (equating on an aggregate basis to a
minimum of ZAR37.49 and up to a maximum of ZAR47.29 per Adcock Ingram Ordinary Share); and
2.2. a minimum of 35.7% and up to a maximum of 49.0% to be settled in New CFR Shares (equating on an aggregate basis to a minimum of
11.24 and up to a maximum of 15.44 New CFR Shares per Adcock Ingram Ordinary Share based on an attributed value of ZAR2.334 per
New CFR Share).
The Cash Portion of the Proposed Offer Consideration will be funded from a combination of cash-on-hand and external borrowings and,
depending on the outcome of the CFR Capital Increase, also from the proceeds of the CFR Capital Increase.
The issue and placement of the New CFR Shares as settlement of the Share Portion of the Proposed Offer Consideration will be authorised
pursuant to the CFR Capital Increase.
The finalisation of the Proposed Offer Mix remains subject to the outcome of the CFR Capital Increase. If any CFR Minority Shareholders
(defined in paragraph 3 below) elect to exercise their pre-emptive rights in terms of the CFR Capital Increase, then the proceeds thereof will
be applied to increase the Cash Portion on a pro rata basis, subject to a maximum of 64.3% of the total Proposed Offer Consideration being
settled in cash. The CFR Controlling Shareholders (defined in paragraph 3 below) have committed not to exercise their pre-emptive rights as
part of the CFR Capital Increase in relation to the Share Portion, if the Potential Offer is made. To the extent that the Cash Portion is increased
as a consequence of the CFR Capital Increase, the Share Portion will be reduced on a pro rata basis, subject to a minimum of 35.7% of the total
Proposed Offer Consideration being settled in New CFR Shares.
Adcock Ingram Ordinary Shareholders will also be offered a mix and match facility (“Mix-and-Match Facility”), whereby they may elect prior to
settlement to receive either a greater proportion of New CFR Shares or a greater proportion of cash. In terms of the Scheme, each Adcock
Ingram Ordinary Shareholder will be entitled to elect to receive up to a maximum cash amount of ZAR73.51 per Adcock Ingram Ordinary Share
or up to a maximum number of shares of 31.5 New CFR Shares per Adcock Ingram Ordinary Share. The aggregate amount of cash and the
aggregate number of New CFR Shares being offered to Adcock Ingram Ordinary Shareholders through the Mix-and-Match Facility will,
however, remain the same, irrespective of this mix and match facility. Accordingly, the elections made by Adcock Ingram Ordinary
Shareholders will be considered and, if necessary, adjusted after taking into account the aggregate amount of cash and New CFR Shares
available, being the aggregate determined pursuant to the implementation of the CFR Capital Increase.
If the Potential Offer is made and the Scheme is proposed and implemented, it will result in Adcock Ingram becoming a subsidiary of CFR,
Adcock Ingram being delisted and CFR being listed in the Pharmaceuticals sector on the JSE by way of a secondary listing.
3. CFR CAPITAL INCREASE
CFR shareholders have agreed to CFR increasing its authorised share capital by the creation of up to 3,000,000,000 new CFR shares with no par
value (“CFR Capital Increase”). The CFR Capital Increase was approved by a special shareholders’ meeting of CFR held on 22 July 2013 and is
currently in the process of registration and approval with the Chilean Superintendencia de Valores y Seguros (“SVS”), the Chilean government
agency responsible for supervising the activities and entities participating in the securities and insurance markets in Chile. CFR will convene a
new shareholders’ meeting for the purpose of amending the CFR Capital Increase, authorising the New CFR Shares from the Capital Increase to
be settled in kind through the contribution of Adcock Ingram shares to CFR, and approving an expert’s valuation opinion as required by the
Chilean Corporations Act in relation to the delivery of Adcock Ingram shares as payment in kind in terms of the TIA.
It is a requirement under the Chilean Corporations Act that, if a company proposes to issue new shares pursuant to a capital increase, existing
shareholders must first be offered the right to subscribe for such new shares on a pro rata basis before any other person who is not a
shareholder may do so.
The controlling shareholders of CFR (“CFR Controlling Shareholders”), comprising three holding companies indirectly controlled by the
Weinstein family, the founders of CFR, and which CFR Controlling Shareholders currently own approximately 73% of CFR’s issued share capital,
have undertaken not to exercise their pre-emptive rights to subscribe for New CFR Shares pursuant to the CFR Capital Increase in relation to
the Share Portion, if the Potential Offer is made. The New CFR Shares in respect of which the CFR Controlling Shareholders are entitled to
exercise pre-emptive rights will be made available to discharge a portion of the Share Portion of the Proposed Offer Consideration. As a
consequence of not following their pre-emptive rights, the CFR Controlling Shareholders will own approximately 55% of CFR’s issued share
capital pursuant to the implementation of the Potential Offer.
Notwithstanding the undertakings given by the CFR Controlling Shareholders, CFR’s remaining shareholders (“CFR Minority Shareholders”)
may elect to exercise their pre-emptive rights by subscribing in cash for New CFR Shares pursuant to the CFR Capital Increase, failing which
such New CFR Shares may also be placed by CFR Minority Shareholders with a third party, whether or not a CFR shareholder. To the extent
that CFR Minority Shareholders elect to subscribe for New CFR Shares pursuant to the CFR Capital Increase (or assign, as they may elect, their
pre-emptive rights to a third party who would ultimately subscribe for the New CFR Shares), CFR will receive cash, thereby reducing the
number of New CFR Shares available to discharge the Share Portion of the Proposed Offer Consideration and increasing the amount of cash
which is available to discharge the Cash Portion of the Proposed offer Consideration.
4. BACKGROUND INFORMATION ON CFR
CFR is a multinational, emerging markets pharmaceuticals company head-quartered in Chile with a market capitalisation of approximately
US$2.1 billion (approximately ZAR22 billion). 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, Guatemala and the Dominican Republic. It also has a growing
presence in other emerging and niche markets including Canada, the United Kingdom and Vietnam. CFR has 14 manufacturing facilities in
Chile, Argentina, Peru, Colombia and Canada.
CFR achieved a compound annual growth rate in revenue of 22% for the period 2009 to 2012.
4.1. History
In September 2010, CFR Chile S.A. and CFR International SpA, the entities that hold CFR’s Chilean and international operations, were combined
to form CFR. 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. At listing, CFR raised a total of
US$370 million (approximately ZAR3.7 billion at current exchange rates), which was used to finance CFR’s expansion strategy.
In 2012, CFR acquired stakes in Domesco in Vietnam and Uman Pharma in Canada. In December of that year, CFR completed the acquisition of
100% of Laboratorio Franco Colombiano Lafrancol S.A.S. (“Lafrancol”) for US$562 million (approximately ZAR5.6 billion at current exchange
rates). With this acquisition, CFR became the largest pharmaceutical company in Colombia. The acquisition of Lafrancol has been successfully
integrated and has already delivered approximately 80% of the target synergies estimated at the time.
As part of CFR’s strategy to exploit multiple sources of growth, the group continues to invest in the launch of new divisions. During 2012, CFR’s
focus on innovation resulted in 215 new products and product-line extensions being launched through its divisions.
The Weinstein family currently indirectly controls approximately 73% of CFR’s issued share capital via three separate holding companies. Mr
Alejandro Weinstein is the current CEO of CFR with 30 years of pharmaceutical experience. Mr. Weinstein has successfully led CFR from a
Chilean-focused pharmaceutical company to a pan-emerging market pharmaceutical corporation.
4.2. CFR divisions
CFR’s businesses are organised into three main areas:
4.2.1. Specialty Pharma: specialises in chronic, semi-chronic and acute medications for sale in pharmacies under doctors’ prescription.
CFR’s focus in these specialties is unique in Latin America, distinguishing it from other regional companies;
4.2.2. Complex Therapeutics: specialises in drugs for the treatment of complex illnesses, with a focus on state institutions, hospitals,
private clinics and complex treatment centres; and
4.2.3. Health & Wellness: a line focused on over-the-counter products, nutrition, food supplements and homeopathic products.
5. RATIONALE FOR THE POTENTIAL OFFER
5.1. Strategic rationale for the Potential Offer
The combination of Adcock Ingram and CFR is expected to:
5.1.1. create a substantial diversified emerging markets pharmaceuticals company with a presence in more than 23 countries and
employing more than 10,000 people;
5.1.2. generate revenues of approximately US$1.3 billion (approximately ZAR13.0 billion);
5.1.3. have an asset base of approximately US$2.1 billion (approximately ZAR21.0 billion) on a pro-forma basis;
5.1.4. benefit from access to high-growth markets, an expanded manufacturing footprint and a complementary product portfolio;
5.1.5. be well positioned to explore other attractive emerging markets opportunities; and
5.1.6. have the potential to generate substantial revenue and cost synergies over time.
5.2. Benefits for South Africa
The combination of Adcock Ingram and CFR is expected to yield the following benefits for South Africa:
5.2.1. Significant foreign direct investment: The Potential Offer represents a significant potential direct foreign investment into South
Africa of over ZAR12.6 billion. The proposed secondary listing of CFR on the JSE is also likely to enhance South Africa’s profile as
an investment destination;
5.2.2. Investment in manufacturing and security of supply: 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. In addition,
CFR has committed to maintaining overall manufacturing levels as well as current levels of supply;
5.2.3. Job creation: The combination of businesses is likely to have a positive effect on long-term national employment and to promote
exports from South Africa. CFR plans to transfer the manufacturing of a significant number of products to South Africa and India.
The combination and additional investment is also likely to generate 50 to 100 new jobs within the Adcock Ingram group;
5.2.4. Commitment to broad-based black economic empowerment: CFR understands the importance of broad-based black economic
empowerment and is committed to ensuring that Adcock Ingram remains appropriately empowered; and
5.2.5. Preserving Adcock Ingram’s heritage: CFR plans to preserve the Adcock Ingram brand and grow it beyond South Africa.
5.3. Attractive valuation with significant cash component
The Proposed Offer Consideration represents a premium of 31% to the unaffected closing price of Adcock Ingram shares of R56.20 on 20
March 2013.
5.4. Adcock Ingram is integral to the combined business
Adcock Ingram is a significant player in the South African healthcare market, with strong brands and world-class manufacturing facilities.
CFR has confirmed its commitment to the Adcock Ingram brand which it views as valuable and an ideal platform from which to grow the
combined business into Africa. Adcock Ingram’s business will be a significant component of the combined business, potentially
generating approximately 40% of the combined group’s revenues.
5.5. Potentially significant synergies
The combined company will be positioned to capitalise on attractive market opportunities that exist in Latin America, Africa, South East
Asia and India. In particular, CFR believes that Adcock Ingram’s world-class manufacturing facilities allow it to be well positioned to export
South African manufactured products to Latin America and South East Asia.
Through its strong local presence in Latin America, CFR will enable Adcock Ingram to access new and attractive markets. CFR today
targets a market of over 500 million patients, representing a commercial opportunity of US$25 billion in Latin American pharmaceuticals
alone. Additionally, through its presence in Vietnam, CFR should also represent an attractive platform through which Adcock Ingram’s
products could be distributed to South East Asia.
A combination of CFR and Adcock Ingram should unlock significant value through complementary product portfolios, business structures,
geographical presence and manufacturing footprints. The combined group will be uniquely diversified and positioned emerging markets
multinational, targeting over two billion patients across Latin America, Africa, South East Asia and India. CFR estimates total synergies
arising from the combination of at least US$440 million (approximately ZAR4.4 billion) on a net present value basis.
5.5.1. Cost Synergies through Consolidation of Manufacturing Footprint: CFR is looking to expand its manufacturing footprint and will
be able to benefit from the excess capacity available in the combined group to optimise factory utilisation rates, resulting in
further manufacturing efficiencies and costs reductions. According to CFR, this will result in savings in Latin America, and
investment of US$20 million to US$30 million in South Africa and India in the form of machinery and R&D. Overall, the new
manufacturing footprint should generate savings by seeking production efficiencies between Latin America, South Africa and
India. CFR estimates such savings to represent approximately US$150 million on a net present value basis before factoring in that
Adcock Ingram’s likely lower production costs will increase the gross margin of CFR’s products. Additionally, Adcock Ingram will
also be able to lower unit production costs by increasing volume and utilisation of its factories. CFR has not considered the value
attributable to the increased utilisation of Adcock Ingram’s factories in quantifying the net present value detailed above.
5.5.2. Revenue Synergies by Maximising Product Complementarity: The combined group will benefit from a highly complementary and
diversified product portfolio for emerging markets. CFR believes that it will be able to contribute to Adcock Ingram’s existing
product pipeline. Conversely, CFR believes that it would benefit from rolling out Adcock Ingram’s portfolio in Latin America. In
particular CFR believes that significant opportunities exist in the following areas:
5.5.2.1. Anti-retrovirals (“ARV”): Over 1.6 million patients are infected with HIV in Latin America. CFR sees an opportunity to
introduce Adcock Ingram’s ARV portfolio in Latin America. Based on current prices in Latin America, it is anticipated
that Adcock Ingram’s ARV products would potentially generate considerable gross margins and that FDA-approved
products would achieve increased pricing, thus generating even higher gross margins. CFR believes this business
opportunity represents a net present value well in excess of US$120 million in Latin America.
5.5.2.2. Over-the-counter (“OTC”): CFR is of the view that the Latin American market represents a unique opportunity for
Adcock Ingram’s OTC portfolio. The OTC market in Latin America is a US$12 billion market growing at a compound
annual growth rate for the period 2007 to 2012 of 12%. Mid to lower income consumers represent the majority of the
overall market and 95% of total consumers. The mid to lower income market segment is characterised by low prices
and mass distribution. CFR’s OTC portfolio is currently positioned towards higher income consumers and does not
target the mid to lower end of the market. Adcock Ingram’s OTC portfolio is cost competitive and could become a
compelling commercial opportunity which CFR has estimated to be valued at approximately US$80 million on a net
present value basis.
5.5.2.3. Pipeline contribution: CFR could provide Adcock Ingram with access to new therapeutic areas, particularly Oncology,
Anaesthesia, Hospital Injectable products (Anti-Infectives), Biologics and Biosimilars. Conversely, Adcock Ingram could
help CFR grow its presence in Diabetes, Dermatology and Ophthalmic. CFR believes synergies in this area to represent
a net present value of at least US$80 million.
5.5.3. Additional Synergies from Sourcing: CFR believes the combined group will be able to combine their active pharmaceutical
ingredient sourcing and realise additional efficiencies. CFR believes synergies from sourcing represent a net present value of
between US$10 and US$20 million.
6. ARRANGEMENTS WITH BEE SHAREHOLDERS
CFR has entered into a non-binding memorandum of understanding with each of Blue Falcon, a private company holding all the issued A
ordinary shares in the Company, and the trustees of the Bophelo Trust, which holds all the issued B ordinary shares in the Company. Blue
Falcon is the vehicle through which Adcock Ingram’s strategic empowerment shareholders hold their interest in the Company. Blue Falcon’s
shareholders are Kagiso Strategic Investment III Proprietary Limited, the Mookodi Pharma Trust and the Kurisani Youth Development Trust.
The beneficiaries of the Bophelo Trust are the BEE staff members of the Company. The memoranda of understanding envisage the
shareholders of Blue Falcon and the beneficiaries of the Bophelo Trust remaining invested in the Bophelo Scheme Shares, which shares equate
to approximately 13% of all of the issued Adcock Ingram shares.
7. COMPANY’S EMPLOYEE INCENTIVE SCHEME PARTICIPANTS
It is contemplated in the TIA that participants in each of the Company’s two employee incentive schemes will benefit from either the exercise
of their existing options in order to participate in the Scheme or the making by CFR of an equitable offer, as the case may be.
8. BAXTER HEALTHCARE S.A. (“BAXTER”)
CFR has entered into a non-binding memorandum of understanding with Baxter regarding arrangements to maintain the existing licensing,
distribution and supply arrangements with Adcock Ingram’s Hospital Products Division. Subject to final agreement and the fulfilment of
suspensive conditions, Baxter will irrevocably consent to the change in shareholding of Adcock Ingram should the Scheme be implemented.
9. PRE-CONDITIONS TO THE POTENTIAL OFFER
On fulfilment or waiver of, amongst others, the following pre-conditions (“Pre-conditions”), the Independent Board will resolve to propose the
Scheme to Adcock Ingram shareholders and the TIA will automatically be deemed to constitute notification of a firm intention to make an
offer by CFR to the Adcock Ingram Ordinary Shareholders:
9.1. execution of legally binding agreements with, among others, Blue Falcon and the Bophelo Trust regarding the matters set out in the
memoranda of understanding concluded between CFR, Blue Falcon and the Bophelo Trust;
9.2. execution of legally binding agreements with Baxter regarding the matters set out in the non-binding memorandum of understanding
concluded between CFR and Baxter;
9.3. receipt of irrevocable undertakings or letters of support in favour of CFR from Adcock Ingram shareholders to vote in favour of the
Scheme;
9.4. receipt by the Independent Board of confirmation that the independent expert’s opinion will be favourable;
9.5. receipt by CFR of confirmation that the Independent Board will recommend to the Adcock Ingram Ordinary Shareholders to vote in
favour of the Scheme;
9.6. consent of counterparties in respect of certain material agreements (other than from Baxter) to the change in shareholding in the
Company; and
9.7. the approval by the Takeover Regulation Panel (“TRP”) of the bank guarantees to be provided by CFR in relation to a portion of the
Scheme Consideration.
10. SUSPENSIVE CONDITIONS TO THE SCHEME
Subject to the fulfilment, or waiver, of the Pre-conditions, the implementation of the Potential Offer and the Scheme will be subject to the
fulfilment or waiver of, amongst others, the following suspensive conditions:
10.1. the approval of the Scheme by Adcock Ingram shareholders;
10.2. receipt of all clearances required in law in connection with the Potential Offer and the secondary listing of CFR shares on the JSE,
including, without limitation, clearances from the TRP, the JSE, the competition authorities in all relevant jurisdictions and the South
African Reserve Bank;
10.3. registration and approval of the CFR Capital Increase by the SVS with the Chilean Securities Registry and the Prospectus by the
Companies and Intellectual Properties Commission; and
10.4. the passing by CFR shareholders of certain resolutions in relation to the CFR Capital Increase; and
10.5. implement the Transaction, including, without limitation, the approval of the expert evaluation opinion to be issued to the CFR
shareholders as required in terms of the corporations law of Chile.
11. ADCOCK INGRAM’S SUSPENSION AND TERMINATION OF LISTING
Application will be made to the JSE, subject to the Scheme becoming unconditional in accordance with its terms, for the suspension and
termination of the listing on the JSE of the Adcock Ingram ordinary shares.
12. CFR’S LISTING ON THE JSE
The JSE has confirmed that CFR meets the entry criteria for a secondary listing on the Main Board of the JSE. Application will be made to the
JSE for the listing of the entire issued share capital of CFR by way of a secondary listing, including the New CFR Shares, subject to the
implementation of the Scheme.
13. BANK GUARANTEES
CFR will on fulfilment of the Pre-conditions be in a position to deliver to the TRP the bank guarantees required in terms of the Companies
Regulations.
14. BOARD RECOMMENDATION
The Independent Board has appointed JPMorgan Chase Bank, N.A., Johannesburg Branch (“JPMorgan”), to act as independent expert for
purposes of considering the terms of the Potential Offer and providing a fair and reasonable opinion in accordance with the requirements of
the Takeover Regulations. The Independent Board has considered the proposed terms and conditions of the Potential Offer based on the
information currently available to it. Subject to the fulfillment or waiver of the Pre-conditions and to receiving confirmation of a favourable
opinion from JPMorgan, inter alia that the proposed terms and conditions of the Potential Offer are fair and reasonable, the Independent
Board intends to recommend the Adcock Ingram Ordinary Shareholders to vote in favour of all resolutions to give effect to the Scheme.
15. RENEWAL OF CAUTIONARY
Adcock Ingram shareholders are cautioned that there is no certainty at this stage that the Potential Offer will be made or that the Scheme will
be either proposed or implemented. The Potential Offer may have a material effect on the price of the Company’s securities. Accordingly,
shareholders are advised to continue exercising caution when dealing in the Company’s securities until a further announcement is made.
16. RESPONSIBILITY STATEMENTS
The Independent Board accepts responsibility for the information contained in this announcement insofar as it relates to Adcock Ingram. To
the best of its knowledge, the information contained in this announcement is true and the announcement does not omit anything likely to
affect the importance of the information.
The board of directors of CFR accepts responsibility for the information contained in this announcement insofar as it relates to CFR. To the
best of their knowledge, the information contained in this announcement is true and the announcement does not omit anything likely to
affect the importance of the information.
Midrand
11 September 2013
Financial Adviser and Transaction Sponsor to Adcock Ingram Financial Adviser to CFR
Deutsche Bank Credit Suisse
Legal Adviser to Adcock Ingram in South Africa Legal Adviser to CFR in South Africa
Read Hope Phillips Attorneys Bowman Gilfillan
Legal Adviser to Adcock Ingram in Chile Legal Adviser to CFR in Chile
Prieto y Cia. Honorato, Russi & Eguiguren Ltda.
Public Relations Adviser to Adcock Ingram Public Relations Adviser to CFR
Brunswick College Hill
Independent Expert to the Adcock Ingram Independent Board Independent Appraiser to CFR Pharmaceuticals S.A.
JPMorgan Chase Bank, N.A., Johannesburg Branch IM Trust Asesorías Financieras S.A.
General:
The release, publication or distribution of this announcement in jurisdictions other than South Africa may be restricted by law and, therefore, any
persons who are subject to the laws of any jurisdiction other than South Africa should inform themselves about and observe any applicable
requirements in those jurisdictions. The information disclosed may not be the same as that which would have been disclosed if this announcement
had been prepared in accordance with the laws and regulations of any jurisdiction other than South Africa.
This announcement is not intended to, and does not, constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any
securities or a solicitation of any vote or approval in any jurisdiction. This announcement does not constitute a prospectus or a prospectus
equivalent document. Shareholders are advised to read carefully any formal documentation in relation to the Potential Offer. The Potential Offer
will be made solely through a circular, which will contain the full terms and conditions of the Potential Offer. Any decision to accept the Potential
Offer or other response to the proposals should be made only on the basis of the information contained in the circular containing the Potential
Offer.
The TIA is, and the Potential Offer will be, governed by the laws of South Africa, which may substantially differ from those of Chile and the
United States.
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 Potential 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 in this announcement may be considered forward-looking. Although (1) Adcock Ingram believes that the expectations reflected
in any such forward-looking statements relating to Adcock Ingram are reasonable, and (2) CFR believes that the expectations reflected in any such
forward-looking statements relating to CFR are reasonable, no assurance can be given by Adcock Ingram or CFR that such expectations will prove to
be correct. Adcock Ingram and CFR do 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: 11/09/2013 04:00:00 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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