JOHANNESBURG (Reuters) – South African drug maker Adcock Ingram said a $ 1.2 billion takeover by Chile’s CFR Pharmaceuticals, which is opposed by its biggest shareholder, was vital to its long-term survival.
State pension fund Public Investment Corporation (PIC) is opposing CFR’s cash-and-shares offer because of concerns about foreign control and the share component of the deal, a source familiar with the fund’s thinking said earlier this month.
Adcock, South Africa’s second-largest drug maker by market value, on Tuesday said it needed to pursue a tie-up with an international pharmaceutical company to compete with larger rivals.
With 90 percent of sales made at home, Adcock has been dwarfed by rival Aspen Pharmacare, which has made an aggressive push into overseas markets via acquisitions in recent years.
“The continuing consolidation of the global pharmaceutical market has again challenged the long-term sustainability of Adcock Ingram’s business,” Adcock said.
Santiago-based CFR last week said it was confident of winning shareholder support for the deal, which would create an emerging-market drugs powerhouse spanning 23 countries.
The takeover needs to get backing from 75 percent of Adcock’s shareholders in a vote next month. PIC holds about 19 percent of Adcock’s shares.
Adcock posted a worse-than-expected 17 percent fall in full-year profit on Thursday as the weaker rand currency made imports of chemicals used to make drugs more expensive. The rand has depreciated by about 20 percent against the dollar since January.
Headline earnings per share (EPS) fell to 350 cents in the year ended September, well below a 388 cents estimate in a Reuters poll of five analysts.
Adcock, the country’s biggest over-the-counter medicines maker, has also been squeezed as cash-strapped consumers cut the size of their purchases or move to cheaper products.
The company suspended dividends as part of an agreement with its suitor CFR.
Costs from the deal of around $ 56 million, or nearly all the net profit the company made this year, are expected to weigh on Adcock’s profitability or its ability to resume dividends next year.
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