Bidvest ups the ante with a 70 buck offer for Adcock

Why would Bidvest want to buy Adcock? Or even a portion thereof? The company segments their business into four distinct operations, South Africa, Namibia, Foodservice and Bidvest corporate. The last one is where I presume the Adcock stake would appear and we discussed briefly in this office that perhaps there is a change of direction here. The business of automobiles, cables and associated services, banking and insurance, freight and storage services, manufacturing and trading businesses, office furniture and equipment, hospitality industry services and equipment, outsourced corporate services, travel management and the big foodservice businesses all tie up into a large diversified business that is centrally managed.


We feel close to this company, so much so that we can see their fire exit from where we sit. Michael saw Brian Joffe getting dropped off outside here in his squash (or tennis) kit, he was thinking hard and exercising at the same time when wanting to make the decision of steering his fellow shareholders in this direction. And in terms of the offer made to Adcock shareholders, they are alongside Community Investment Holdings (CIH) when making this offer to acquire 34.5 percent of the Adcock shares in issue, outside of the treasury shares. CIH themselves have various healthcare investments, ranging from Public-private partnerships with government hospitals and pharma investments, which include Sonke pharmaceuticals, which is a JV between Ranbaxy South Africa and CIH.


And Ranbaxy, if you needed reminding, is a 191 billion Indian Rupee business, 31.55 billion Rand is the market cap of Ranbaxy. So there is an angle of sorts here, a bigger foot print for Ranbaxy here in South Africa with CIH being the same shareholder in both. So I can see something here, but I am not even sure how big Africa is to Ranbaxy for the time being, their annual report suggests that this remains a key market for them. Them being Ranbaxy. Sales in South Africa in 2012 for Ranbaxy was 50 million Dollars, half a billion Rand. Not really a huge participant, but there and there abouts.

But in an interview on CNBC Africa with Alec Hogg, at lunchtime, Brian Joffe explained how the deal of Bidvest was far better than the CFR deal, because remember that their offer (the Chileans) is far higher than this. Or WAS higher, but because it is part shares and the CFR shares are trading lower, this deal is better. But because CFR is small, they are leveraging up here. Shareholders existing in Adcock could be benefitting more, said Joffe. Believe it or not, Bidvest and the PIC have not chatted yet, but will probably vote in the same direction. This is interesting, not because we are Adcock shareholders on behalf of our clients, but because we are Bidvest shareholders. Obviously shelling out a lot of cash (4 billion Rand) for an under performing asset that clearly needs a management shakeup.


Joffe points to the successes of Aspen and the underperformance of Adcock, relative. Over five years Adcock (with this deal related activity) has doubled in price, Aspen is up 690 percent. The real divergence comes in August 2011, until then the two prices tracked each other on a relative basis, from the Adcock unbundling by Tiger Brands. Perhaps the comparison is too simple, Aspen is not Adcock, and Adcock is not Aspen. Borrowing of course a line from Spanish PM Mariano Rajoy who said, Spain is not Uganda. I wonder if this has lit a fire under the Adcock shareholders bottoms, the PIC can vote around 18 percent, Bidvest have been buyers and have added yesterday to own around 5 percent. A little shakeup is needed, to awake a slumbering (almost) giant.