Bidvest announces that they are looking to buy 60 percent of Adcock

In case you missed it, perhaps you took the day off like I did on Friday, Bidvest have done something cheeky and potentially opportunistic. The official announcement came Friday, joint cautionary announcement: "Bidvest Shareholders are advised that Bidvest has today submitted a firm intention letter ("the Letter") to the Board of Directors of Adcock Ingram Holdings Limited ("Adcock Ingram") in terms of which Bidvest proposes to acquire 60% of the issued share capital of Adcock Ingram from its shareholders." Wow. Why I say cheeky is that the timing seems good, from the part of Bidvest. Adcock has struggled for the better part of five years since having been unbundled from Tiger Brands.


Adcock's bottom line has only managed to grow below inflation for the last five years. Top line growth has been muted too, growing at less than 9 percent per annum for the last half a decade. The stock has woefully underperformed their peer Aspen. In part due to the brilliance of Aspen, but also one got the sense that post the Tiger unbundling and the associated accompanying fines that they kind of "lost their way". Plus with their business being less internationally focused like Aspen, and with South African business dragging with AVR tenders not going their (Adcock's) way.


I am guessing that Bidvest are seeing sunnier days ahead for the Adcock business and by being the majority shareholder, they could give the business much needed impetus. I wonder what the PIC, as the biggest shareholder thinks, they own 14.4 percent. And then Blue Falcon Trading 69 at 10.34 percent. That entity is nearly two thirds owned by Kagiso and just over one quarter owned by a community trust, Kurisani. I am not too sure of their intentions. You might still have a lot of "soft" old Tiger Brands shareholders, who might be more than happy to go along for the cash option. I suspect the PIC might not be too happy, but I am sure that the fellows at Bidvest have done their homework. The cheque for 60 percent of Adcock at current levels is around 6.5 billion Rands, roughly 8.3 percent of the Bidvest market cap. I suspect that this might just be their biggest deal ever, without having done too much homework in this regard.