Bidvest CEO Brian Joffe. Picture: FINANCIAL MAIL
Bidvest CEO Brian Joffe. Picture: FINANCIAL MAIL

PHARMACEUTICAL group Adcock Ingram is being pursued by two new suitors, in addition to Brian Joffe’s Bidvest. Speculation is running high that French pharmaceutical giant Sanofi is firmly in the running.

Insiders say a number of multinational companies have been looking to carve up Adcock ever since Bidvest made an opportunistic R6.2bn bid for it in March — an offer that has sat on the shelf since Adcock’s board refused to present it to shareholders a few weeks ago.

Sanofi, the fourth-largest drug company in the world with a presence in more than 100 countries, has some experience of takeovers, swallowing rival Aventis in 2004 for €54.5bn.

With a market value of €112bn, Sanofi could easily digest Adcock.

Sources say Sanofi had been looking at making a bid for Adcock for a while, and Bidvest spurred it into action.

Pharmaceutical companies have been looking to expand in Africa for some time, and some analysts said American drug firm Merck was another possible interested party.

Adcock has had a marketing and distribution agreement with US based Merck to sell non-prescription medicines as well as treatments for high blood pressure since 2010. Other analysts pointed to Indian pharmaceutical companies as bidders.

Jean Pierre Verster, equity analyst at 36ONE Asset Management, said there was a greater than 50% probability that Baxter Healthcare was involved in one of the proposals.

A company focused on blood and renal products, Baxter is unlikely to allow Adcock to be bought by a competitor — especially as it has an exclusive distribution deal with the South African company.

In a research report this week, JP Morgan Chase & Co said Adcock’s share price may climb higher, even as the price shot up 8.8% to a new high on Thursday to R67.50.

JP Morgan said that, given that there may be “multiple bids” for the company, they believed the stock could be worth R75.80 a share — valuing the company at R13.2bn

Adcock played coy on Thursday about who was pursuing it, saying only it had received non-binding proposals that could lead to an offer to buy either 100% of it, or a controlling stake.

This could leave Bidvest, which wanted only 60% of Adcock, out in the cold. After Adcock’s board spurned Mr Joffe’s proposal, Bidvest said it planned to put its proposal directly to shareholders, effectively making it a hostile bid. But it has not done so.

As more bids enter the fray, it seems unlikely Mr Joffe will extend a fresh bid for the group. This week, Mr Joffe told Business Times he was still interested in Adcock, but was waiting for the two pieces of information so he could finalise an offer.

First, he wants an assurance that Adcock’s earnings will not be less than 10% below that of a year ago; second, he wants clarity about the possible effect on suppliers should there be a change of control. But Adcock’s board has refused to provide this.

“So far they haven’t given it to us. I assume if they’re giving others information, they need to pass on the same information to us.”

Mr Joffe said next time, Bidvest would make an offer directly to shareholders. “We’re still interested but need the information on Baxter’s contract.”

The question is, if there is a change in control at Adcock Ingram, will Baxter gets the right to cancel its distribution deal with the South African company.

Mr Joffe said any company interested in buying Adcock would want to know these ramifications of a change of control: “to me there’s an obligation to publish this information.”

Bidvest is expected soon to announce an offer for services group Mvelaserve. Last week, Bidvest increased its stake to 34.75% from 26.41% at the end of April.

• This article was first published in Sunday Times: Business Times