Wrap Text
CFR Pharmaceuticals makes firm offer to acquire Adcock Ingram for R12.6bn
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 Chilean Registry number: 1067
ISIN: ZAE000123436 Share code on the Santiago Stock Exchange: CFR
(“Adcock Ingram” or “the Company”) ISIN: CL0001762831
(“CFR”)
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
MEDIA RELEASE
15 November 2013
CFR Pharmaceuticals makes firm offer to acquire Adcock Ingram for R12.6bn
- Creating a unique emerging markets pharmaceuticals leader.
- Landmark South-South transaction would represent almost 65% of the net annual FDI of $1.9bn
that South Africa averaged between 1994 and 2012
In a joint announcement on the JSE’s SENS today, Adcock Ingram shareholders and the market were
informed that the transaction implementation agreement between CFR Pharmaceuticals of Chile and
Adcock Ingram has become effective. Showing confidence that it will secure the requisite shareholder
support for the transaction, CFR is making a recommended cash and shares offer to acquire Adcock
Ingram for R12,6 billion, in what would be one of the most significant inbound investments into South
Africa in recent years.
Of the R12,6 billion consideration payable, up to R8.1 billion will be injected into the country by way of a
cash settlement, and the balance will be settled in CFR shares. The newly combined company will be
listed on both the Santiago Stock Exchange and the JSE, thus enhancing South Africa’s reputation as a
global investment destination. This will be the first time the South African Reserve Bank’s inward listing
relaxation will have been used to effect a major cross-border transaction, and as such the CFR local
listing will not impact shareholders’ foreign exchange allocation.
Indicating their support for this signature transaction, shareholders representing approximately 45% of
the share capital of Adcock Ingram (excluding treasury shares) have pledged support for the transaction.
Visio Capital, Absa Asset Management, Stanlib Investment Management, Afena Capital, 36One Asset
Management and Sanlam Asset Management are among the 29.3% of the shares eligible to vote at the
general meetings that have irrevocably undertaken to vote in favour of the resolutions required to
approve the scheme of arrangement. Holders of another 7,5% of the shares eligible to vote at the
general meetings have provided letters of support.
Adcock Ingram’s BEE shareholders have entered into agreements with CFR to ensure that they remain
shareholders in Adcock Ingram. In addition, CFR has secured the support of Adcock’s multinational
partners – including Baxter Healthcare, which provides products to Adcock Ingram’s hospital division,
and Medreich, Adcock Ingram’s joint venture partner in India – consenting to a change in control of
Adcock.
Commenting on the announcement CFR Chief Executive Officer Alejandro Weinstein said: “We are
delighted to announce a firm and binding offer for Adcock Ingram. Together, we have the opportunity to
create a world-class, pan-emerging markets pharmaceuticals business delivering a long-term future and
significant benefits for all South African stakeholders. Indeed, the compelling rationale for the proposed
combination has been accepted by the overwhelming majority of all stakeholders we have engaged with
and this is reflected in the outstanding level of shareholder support received to date. We look forward to
confirming that support at the General Meeting next month to approve the combination.”
Dr Khotso Mokhele, Chairman of Adcock Ingram, said: “In line with our fiduciary duties, the Adcock
Ingram Board and Independent Board has overseen a rigorous, eight month process where we have
thoroughly evaluated all the options before us to ensure we maximise value for shareholders and all
other stakeholders. We are unanimous in our view that CFR remains the most compelling option on all
counts - from the offer price, strategic rationale and ability to execute, through to the creation of a
unique emerging markets pharmaceuticals player. The combination with CFR makes an enormous
amount of sense and we are pleased with the support we have received from a substantial number of
our shareholders, including our BEE shareholders and key multinational partners. We appreciate the
engagements with relevant senior South African government representatives, which have been positive
and constructive.”
Mokhele added: “This presents a ‘win win’ for all stakeholders. This signature transaction will not only
benefit our shareholders, but also our employees and customers, and ultimately patients and South
Africa at large. It will support our national strategic objectives in areas such as skills transfer, exports
and jobs. It would implement much of what the National Development Plan argues is required for South
Africa’s successful future.”
This landmark South-South transaction would represent approximately 65% of the net annual FDI of
$1.9bn that South Africa averaged between 1994 and 2012, finally taking South Africa closer to the $5
billion-$10 billion that the Goldman Sachs’ recently published “Two Decades of Freedom” report
recommends South Africa needs to fund its current account deficit. Goldman Sachs’ analysis of South
Africa’s successes and challenges has been endorsed by Cabinet as an affirmation of the priorities for
the future as set out in the National Development Plan.
Adcock Ingram CEO Dr Jonathan Louw said: “In the context of a rapidly consolidating global
pharmaceutical market, the combination with CFR allows Adcock Ingram to achieve optimum value
potential through access to high-growth markets, an expanded geographical and manufacturing
footprint, and a complementary product portfolio. We will be ideally positioned to explore other
attractive emerging markets and sector consolidation opportunities across Latin America, Africa, South
East Asia and India.”
The Adcock Ingram Independent Board appointed JPMorgan Chase Bank to act as independent expert to
review the terms of the offer and provide a fair and reasonable opinion. JP Morgan has confirmed that,
in its opinion, the terms and conditions of the offer are fair and reasonable.
-ENDS -
NOTE TO EDITORS
Transaction details
- A minimum of 51% and potentially up to a maximum of 64.3% of the R12,6bn total
consideration will be settled in cash, with the remainder in new CFR shares.
- With CFR’s shareholders having authorised the capital increase process in a special general
meeting in Chile on 22 July, it is expected that the final offer mix and the final ratio of cash to
new CFR Shares will be finally determined and announced on or about February 2014.
- The Scheme Consideration, based on the minimum cash amount and maximum number of New
CFR Shares in terms of the Offer Mix, equates to:
o ZAR73.51 based on the fixed attributed value of ZAR2.334 per CFR Share, which
represents a premium of 31% to the closing price of Adcock Ingram ordinary shares of
R56.20 on 20 March 2013
o ZAR75.76 based on a value of ZAR2.48 per New CFR Share (calculated based on the ZAR
equivalent closing price of CFR shares as at 14 November 2013 and ZAR/CLP exchange
rate of ZAR50.35), which represents a premium of 35% to the Unaffected Share Price;
and
o ZAR77.02 based on a value of ZAR2.56 per New CFR Share (calculated based on the
volume weighted average price of CFR shares for the 30 trading days up to and including
14 November 2013 and the daily ZAR/CLP exchange rate over the same period), a
premium of 37% to the Unaffected Share Price.
- The current combined value of the offer price and identified synergies is in excess of R80 per
share.
Transaction rationale, synergies and benefits to SA
- The combined business would be a substantial and uniquely diversified emerging markets
pharmaceuticals group with a presence in more than 23 countries and employing more than
10,000 people.
- Adcock Ingram is integral to the combined business and has an expected contribution of around
46% of combined group revenue, representing the largest contribution by country followed by
Colombia and Chile with 18% and 12% respectively. The Adcock Ingram brand will be preserved
and extended to markets beyond South Africa.
- CFR will transfer the manufacturing of a significant number of its products to Adcock’s factories,
from which it will drive exports into new markets in Latin America and South East Asia. This is
expected to result in further investment in manufacturing and have a positive impact on skills,
technology transfer, as well as jobs in South Africa.
- The combination of Adcock and CFR is expected to unlock significant value through
complementary product portfolios, business structures, geographical presence and
manufacturing footprints.
- CFR estimates total synergies of at least R4,5 billion (US$440 million)/ R6.30 per share will be
achieved.
- The combined business will be well positioned to explore other attractive emerging markets
across Latin America, Africa, South East Asia and India.
- CFR intends to roll out Adcock’s ARVs, over-the-counter and other products into the high-
growth Latin American markets. While CFR will provide Adcock with access to new therapeutic
areas such as oncology, anaesthesia and anti-infective hospital injectable products, Adcock will
help CFR grow its presence in the diabetes, dermatology and ophthalmic areas. There will also
be strong efficiencies by jointly sourcing active pharmaceutical ingredients.
About CFR Pharmaceuticals (www.cfr-corp.com)
Similar to Adcock Ingram, CFR’s roots lie in a family business which was started in 1922. Today it is a
well-respected business listed on the Santiago stock exchange and managed by the third generation of
the Weinstein family. Since 1990, under the leadership of current CEO, Mr. Alejandro Weinstein, CFR
has successfully expanded beyond Chile into other countries in Latin America and other emerging
markets.
Today, CFR has 14 manufacturing sites and has a market leading presence in Chile, Peru and Colombia. It
also has operations in 12 other Latin American countries and a growing presence in other markets
including Canada, the UK and Vietnam.
CFR’s businesses are organised into three main areas:
- Specialty Pharma, which 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;
- 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
- Health & Wellness: a line focused on over-the-counter products, nutrition, food supplements
and homeopathic products.
In 2012, CFR generated revenues of US$757 million. Its market capitalisation exceeds US$2 billion.
About the Chilean Business Environment
Chile is widely accepted as an attractive business environment, as evidenced by the presence of many
foreign multinationals regional offices in Santiago. Chile is ranked 20th, immediately behind the US, in
the 2012 Transparency International Corruption Perceptions Index.
Chile’s sound regulation, combined with political and economic stability, has boosted foreign direct
investment. This grew by 32% to more than US $30 billion in 2012, ranking Chile in the world’s top 10 in
foreign capital inflows for the first time.
In the past 20 years, Chile has recorded an average annual per capita growth of 3.8 % and per capita
income almost doubled in real terms. The World Bank predicts GDP growth of 4.7% in 2013. Gross
National Income per capita is US$14,280 for 2012.
The pharmaceutical market in Chile and neighbouring Latin American countries is one of the fastest
growing in the world, due to rapid population growth and increasing life expectancy. According to
Global Data, the total market is expected to grow at a compound annual growth rate of more than 10%
over the next seven years.
About Adcock Ingram - www.adcock.com
Adcock Ingram provides an extensive portfolio of branded and generic medicines, is the market leader in
over-the-counter brands, and is South Africa’s largest supplier of hospital and critical care products.
Adcock Ingram has expanded its manufacturing and marketing expertise into the rest of Africa and India
and continues to maintain its focus on the acquisition of businesses and brands in high-growth emerging
markets. African investments include Zimbabwe, Ghana and Kenya.
Media and Investor Presentation: 15h30
- Adcock Ingram and CFR will host an investor and media presentation at 15h30 today, 15
November at the Il Paviglione room Michaelangelo Hotel Sandton, Johannesburg.
- The presentation will also be webcast at http://themediaframe.eu/links/adcock131024.html
Media enquiries
For Adcock Ingram: Brunswick
Tel: +27 11 502 7300
Marina Bidoli: +27 83 253 0478; mbidoli@brunswick.co.za
Carol Roos: +27 72 690 1230; croos@brunswickgroup.com
For CFR: College Hill
Amelia Soares: +27 82 654 9241; amelia.soares@collegehill.co.za
Mark Garraway: +27 82 610 1226; mark.garraway@collegehill.com
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 Offer. The Offer will be made solely through a circular, which will contain the full terms and conditions of the
Offer. Any decision to accept the Scheme of other response to the proposals should be made only on the basis of the
information contained in the circular containing the Offer.
This announcement by Adcock Ingram and CFR is made in connection an offer for the securities of a South African company
Adcock Ingram by means of a Scheme. The Offer is subject to disclosure requirements under South African law that are
different from those of the United States and Chile. Financial statements included in this announcement have been prepared
in accordance with South African accounting standards that may not be comparable to the financial statements of United
States or Chilean companies.
It may be difficult for you to enforce your rights and any claim you may have arising under the United States federal
securities laws, since Adcock Ingram is located in South Africa, and all of its officers and directors reside outside of the United
States. You may not be able to sue Adcock Ingram or its officers or directors in a foreign court, including South African courts,
for violations of the Unites States securities laws. It may be difficult to compel Adcock Ingram and its affiliates to subject
themselves to a United States court's judgment.
You should be aware that CFR may purchase Adcock Ingram ordinary shares otherwise than under the Offer, such as in open
market or privately negotiated purchases.
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 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 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: 15/11/2013 02:19:00 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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