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Adcock Ingram Enters Into Discussions With CFR Pharmaceuticals To Create A Leading Global Emerging Markets Pharmaceuticals Company

The Independent Board of Adcock Ingram today announced that it has entered into discussions with CFR Pharmaceuticals S.A. (CFR) – a multinational emerging markets pharmaceutical company based in Chile – that may lead to CFR making a cash and share offer to acquire 100% of Adcock’s entire share capital. The transaction, if implemented, would create a merged company with combined revenues of approximately US$1.3 billion (approximately ZAR12.1 billion).

CFR was founded in 1922 and is listed on the Santiago stock exchange. CFR has successfully expanded beyond Chile into other countries in Latin America and other emerging markets. Today, CFR employs over 7000 people and has a market leading presence in Chile, Peru and Colombia. It has operations in North America and Europe through its Canadian subsidiary, Uman Pharma, and its UK-based subsidiary, Allergy Therapeutics. CFR also has a presence in South East Asia through a manufacturing hub and a commercial affiliate in Vietnam.

The potential offer price of R73.51 per Adcock ordinary share would be settled in cash and new CFR ordinary shares. CFR would also make comparable offers to Adcock Ingram’s broad based black economic empowerment partners and participants in its employee incentive schemes.

The combination of Adcock Ingram and CFR would create a leading, diversified, emerging markets pharmaceuticals company helping over two billion patients in more than 23 countries. CFR should benefit from rolling out Adcock Ingram’s portfolio – which includes anti-retrovirals (ARVs), over-the-counter (OTC), diabetes, dermatology and ophthalmology medicines – in Latin America, while also gaining access to Adcock’s markets in sub-Saharan Africa. CFR has stated that it will seek to add to Adcock’s existing product portfolio in sub-Saharan Africa. In addition, through its Complex Therapeutics Division, CFR will provide Adcock with access to new therapeutic areas. Similarly, Adcock Ingram would gain access to attractive new markets in SE Asia. Adcock Ingram would also seek improved production efficiencies by increasing volumes and utilisation rates. Adcock Ingram and CFR will seek to combine sourcing and procurement of active pharmaceutical ingredients, which are key to the manufacturing of medicine, and benefit from each other’s intellectual property and new therapeutic areas.

If a transaction materialises, CFR has indicated that the Adcock Ingram brands will be preserved and extended into new markets. Adcock Ingram’s current manufacturing facilities would play a key role in the combined group which would shift production of certain products to South Africa and India. CFR has also indicated that it has no plans for retrenchments in the event of a transaction; if anything, the expectation is that the impact of the combination on employment will be positive. In addition, CFR has committed to ensuring that Adcock Ingram remains appropriately empowered.

Commenting on the potential offer, Chairman of Adcock Ingram’s Independent Board Dr Khotso Mokhele said: “Adcock Ingram’s Independent Board believes there is a compelling rationale for a combination of CFR and Adcock Ingram. The companies have complementary product portfolios, business structures, geographical presence and manufacturing footprints, and the combination of the companies would deliver value not only to shareholders, but also to employees and South Africa at large.”

If a transaction eventuates, South Africa will remain core to the merged company, generating approximately 40% of the combined revenues. The consolidated manufacturing footprint is also expected to generate further investment in South Africa and India. In addition, CFR would seek a secondary listing on the JSE, and the combined company would therefore benefit from a broader global investor base with listings in both Johannesburg and Santiago.

Dr Mokhele added: “Should these discussions eventuate in a transaction, it would represent a significant foreign direct investment into South Africa, enhancing South Africa’s reputation and profile as an attractive investment destination. The combined company would optimise manufacturing efficiencies by shifting production of certain products to South Africa, resulting in additional investment in manufacturing – ultimately with a positive effect on long-term employment and exports.”

Dr Mokhele concluded: “This announcement is the result of the rigorous Board process aimed at maximising value for our shareholders, and protecting the interests of the company and its stakeholders.”

Ends

Notes to Editors

CFR Pharmaceuticals

CFR is a multinational emerging markets pharmaceutical company. Similar to Adcock Ingram, CFR’s roots lie in a family business which was started in 1922 by Mr Nicolas Weinstein. Today it is a well-respected business listed on the Santiago stock exchange and managed by the third generation of the Weinstein family. Since 1990, under the leadership of current CEO, Mr Alejandro Weinstein, CFR has successfully expanded beyond Chile into the Americas, Europe, Canada and South East Asia.

Today, CFR employs over 7,000 people including a sales force comprising nearly 2,000 sales representatives. CFR has market leading operations in Chile, Peru and Colombia as well as a presence in Venezuela, Argentina, Bolivia, Paraguay, Ecuador, Costa Rica, Panama, El Salvador, Nicaragua, Honduras and Dominican Republic. In addition, CFR has operations in North America and Europe through its Canadian subsidiary Uman Pharma and its London-based subsidiary Allergy Therapeutics respectively. CFR also has a presence in South East Asia through a manufacturing hub and commercial affiliate in Vietnam.

In 2012, CFR generated revenues of US$757 million, which includes the recent Lafrancol acquisition.

CFR’s business model is focused on the development, manufacture and commercialisation of off-patent and locally unpatented branded specialty pharmaceutical products. CFR is present in a number of business segments, including, Drugtech (neurology, psychiatry and cardiology), Gynopharm (women’s health), Recalcine (acute therapeutic areas), Biomedical Sciences (monoclonal antibodies and treatments related to transplants, dialysis, oncology and rheumatology) and Complex Injectables (sterile injectable products and lyophilized forms, for anesthesia, infectious diseases, cardiology and critical care) amongst others.

In 2011, CFR successfully completed its initial public offering on the Santiago Stock Exchange, which was more than 10 times oversubscribed, transforming CFR into the only publically traded pan-Latin American pharmaceutical company. CFR has a market capitalisation of approximately US$2.2billion.

For more information go to www.cfr-corp.com

Adcock Ingram
Adcock Ingram is a leading South African pharmaceutical company. The company provides an extensive portfolio of branded and generic medicines, has a strong presence in over-the-counter brands, and is South Africa’s largest supplier of hospital and critical care products.
Adcock Ingram has expanded its manufacturing and marketing expertise in to the Rest of Africa and India and continues to maintain its focus on the acquisition of businesses and brands in high-growth emerging markets. African investments include Zimbabwe, Ghana and Kenya.

For more go to information: www.adcock.co.za


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