S Africa's Adcock Ingram receives $1.3-bn bid from Chile's CFR Pharma

AdcockSouth Africa's second-largest pharmaceutical company Adcock Ingram Holdings yesterday said it has received a $1.3 billion (12.9 billion rand) non-binding cash and stock offer from Chilean drugmaker CFR Pharmaceuticals SA.

CFR has offered to pay 73.51 rand per share in both cash and shares, a 14-per cent premium to Adcock Ingram's yesterday closing price of 64.50 rand.

Santiago-based CFR, Chile's largest drugmaker, said that the merger would create a company with annual revenue of about $1.3 billion, an asset base of approximately $2.1 billion, have a presence in more than 23 countries and employ more than 10,000 people.

Johannesburg-based Adcock Ingram began as the EJ Adcock Pharmacy in Krugersdorp 120 years ago.  It was listed on the Johannesburg Stock Exchange (JSE) in 1950 before it became a wholly-owned subsidiary of Tiger Brands, and was subsequently delisted in 2000.

After the unbundling from Tiger Brands, Adcock Ingram re-listed on the JSE in 2008.

The company has a market cap of about 9 billion rand and holds a 10-per cent share of the private pharmaceutical industry in South Africa.

Adcock Ingram operates in two areas, pharmaceutical and hospital products business.

It has an extensive range of branded and generic prescription and OTC products in a broad range of therapeutic classes such as, analgesics, allergy, cardiovascular, central nervous system, dermatology, ear/nose/eye preparations, feminine health, gastrointestinal, vitamin, mineral and energy supplements as well as a selective range of personal care products.

In generics, the company markets a broad range of affordable products under the corporate brand. In branded products, the company markets leading brands such as Adco Dol, Allergex, Bioplus, Citro-Soda, Corenza C, Myprodol, Panado, Syndol, vita-thion and Unique Formulations, as well as a other brands on behalf of overseas drug companies.

Adcock Ingram Critical Care is South Africa's largest supplier of hospital and critical-care products, blood systems and accessories as well as products used for renal dialysis and transplant medication.

This business unit has a 60-year partnership with US-based Baxter International.

The South African healthcare market benefits from favourable demographic trends, such as government initiatives to combat HIV / AIDS, sustained growth in the middle class and increased accessibility to healthcare products.

Adcock Ingram has low-cost manufacturing facilities in South Africa and India, whereby it is able to maintain a cost-efficient manufacturing base and through acquisitions and market development, it has been able to establish a strong presence in East and West Africa through branded generic and OTC products.

For the year ended September 2012, the company reported a 3-per cent increase in revenue at 4.6 billion rand over the previous year. However, its operating profit fell 19 per cent to 869 million rand and headline earnings per share dropped 9 per cent to 422.4 cents as profit on prescription medicines declined and input costs increased.

In July 2012, Adcock Ingram acquired Goa-based Cosme Farma Laboratories, a pan-Indian pharmaceutical company for Rs480 crore ($86 million). (See: South Africa's Adcock Ingram to buy Cosme Farma drug business for Rs480 crore)

In March, diversified South African conglomerate Bidvest Group had offered to significantly raise its stake in Adcock Ingram from 2.4 per cent to 60 per cent for approximately 6.2 billion rand ($670 million).

Adcock Ingram rejected the offer but its largest shareholder, the Public Investment Corp, the South African government-employee pension-fund, has said that it would prefer a local company buying Adcock Ingram.

CFR operates through seven divisions - women's health products under the Gynopharm range, cardiovascular neuroscience and urology treatments under the Drugtech portfolio, production of drugs for dialysis, transplants, oncology and rheumatology under Biomedical Sciences, therapeutic products in the general medical area and paediatrics, gastroenterology and traumatology, among others under its Recalcine range; and over-the-counter healthcare and wellness products as part of its K2 Health & Wellness range, and Complex Injectables.

It sells its products in 15 Latin American countries and is one of the largest pharmaceutical companies in Latin America.

For CFR, a deal would allow it to expand its current small presence in Africa's expanding markets.