Joint move on Adcock underlines shift at PIC

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If the deal goes through, Bidvest will manage the ailing pharmaceuticals firm although the PIC will retain all of its rights as a 22.4% shareholder. It would be the third such tie-up for the PIC in five years.

CEO Daniel Matjila said the PIC would now conclude agreements with "strategic equity partners" that could manage companies in which it was invested. The PIC has similar agreements with listed property firm Growthpoint, and cement producer Afrisam. Growthpoint controls the PIC's V&A Waterfront 50% joint venture in Cape Town. The PIC also has an agreement with the Pembani Group, which controls Afrisam, even though it has a 30% shareholding compared to the PIC's 66% stake.

"The agreement under discussion with Bidvest is one of many the PIC will conclude with strategic equity partners about the running of its major investments," Matjila said.

"The PIC does not manage companies, but we'd like to have good managers in place. Maybe this (agreement with Bidvest) will be along the same lines.

"We believe those agreements with Growthpoint and Pembani are running very well. There should be more."

Pool agreement

Yesterday, Bidvest said it was entering into a proposed "pool agreement" with the government pension fund manager, with a "view to joint control" of 82-million ordinary shares in Adcock. This represents about 47.82% of Adcock. Bidvest and the PIC will each contribute 41million ordinary shares.

"Bidvest is engaged in discussions with the PIC and is unable to provide any further detail at this stage," said group financial director David Cleasby.

Bidvest already owns 30.5% or 34.5% of Adcock, depending on how its "A" and "B" shares are classified. The PIC holds nearly 23% of the drug maker.

As part of the proposed pool agreement, Bidvest said it was "contemplated" that it "would be responsible for the management of Adcock, subject to satisfactory performance".

Battle for control

Expansion into emerging markets has given Adcock a manufacturing, marketing and distribution presence in sub-Saharan Africa and India. The potential of these markets has led to a bitter battle between Adcock's board and Bidvest - starting in March 2013 - for control of the company, which Bidvest says needs a "significant review of its activities" and is "significantly overcapitalised".

"We can't read much more into it at this stage than that they (Bidvest and the PIC) both want a stable environment in which management can take long-term decisions without having to fight every inch of the way," said Imara SP Reid head of research Stephen Meintjes.

Buyout offer

Bidvest last month offered to buy the remaining ordinary shares in Adcock - excluding treasury shares - for R52 each. This represents a 13% premium to the volume-weighted average price per Adcock share for the 30 days ended February.

Bidvest CEO Brian Joffe said the offer was made to "discharge liability" for Adcock's black economic empowerment partners, who owned about 13% of the pharmaceutical group.

The empowerment scheme was "hopelessly under water" and would not deliver shareholder benefit, he said.

But the proposed offer triggered a general offer. At the time, Joffe said he expected only about 10% of shareholders, holding 40% of Adcock, to accept it.

Source: Business Day via I-Net Bridge