| Thu 9 Apr 2009, 7:05 | | AIP - Adcock Ingram - Announcement of firm intention by Adcock to acquire the |
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AIP
AIP
AIP - Adcock Ingram - Announcement of firm intention by Adcock to acquire the
entire issued share
Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2007/016236/06
Share code: AIP
ISIN: ZAE000123436
("Adcock")
ANNOUNCEMENT OF FIRM INTENTION BY ADCOCK TO ACQUIRE THE ENTIRE ISSUED SHARE
CAPITAL OF CIPLA MEDPRO SOUTH AFRICA LIMITED ("CMSA") AND CAUTIONARY
ANNOUNCEMENT REGARDING ADCOCK
1. Introduction
Shareholders of Adcock ("Adcock Shareholders") and shareholders of CMSA
("CMSA Shareholders") are advised that Adcock has submitted to the board of
directors of CMSA (the "CMSA Board") written notice of its firm intention
("Firm Intention Notice") to make an offer to acquire all the ordinary
shares making up the entire issued ordinary share capital of CMSA ("CMSA
Shares") (the "Acquisition") on the terms and conditions set out below.
While not its preferred outcome, Adcock is reconciled to acquiring less
than 100% of the issued ordinary share capital of CMSA, subject to a
minimum shareholding of 51% (the "Partial Acquisition").
The Acquisition and the Partial Acquisition are generically referred to
herein as the "Transaction".
2. Background information on CMSA
CMSA, formerly known as Enaleni Pharmaceuticals Limited, is one of South
Africa`s larger generic pharmaceutical companies. The group was established
in January 2003 and listed on AltX in May 2005 and on the main board of the
securities exchange operated by JSE Limited ("JSE") in December 2005.
CMSA primarily markets and distributes a broad range of pharmaceutical
products, including treatments for cardiovascular and respiratory diseases,
diabetes, oncology, neuro-psychiatry and HIV/Aids.
CMSA is party to a long term supply arrangement with Cipla Limited of India
("Cipla India") in relation to the pharmaceutical products developed by
Cipla India.
3. Rationale for the Transaction
The global pharmaceuticals market is consolidating as product pipelines of
multinationals decline. Increasing numbers of products approaching patent
expiry, coupled with a decline in the level of innovation, has seen
multinationals move towards consolidation to reduce risks.
The South African pharmaceuticals market is evolving too, influenced by
consolidation in global pharmaceuticals markets and local legislation.
Both Adcock and CMSA will need to adapt to this changing landscape to
reduce risks and remain competitive.
Adcock believes that the Transaction represents a unique opportunity to -
- improve the strategic positioning of both companies by
enabling the combined group to compete more effectively with
local companies and multinationals in the South African
pharmaceuticals market;
- reduce risks through a more diversified, complementary and
strengthened portfolio of prescription, over-the-counter
("OTC") and hospital products, with an enhanced and more
balanced exposure to target markets;
- drive efficiencies that neither company could extract on a
standalone basis through enabling scale economies and value
chain consolidation;
- deliver revenue synergies and greater access to products
through -
- improved marketing and distribution of CMSA`s strong
generics product pipeline;
- leveraging Adcock`s strong sales, marketing, distribution
and branding capabilities, particularly in the fast-moving
consumer goods and hospital channels;
- improved utilisation of Cipla India`s world-class R&D and
clinical capabilities; and
- optimising Cipla India`s OTC and hospital products
offering in South Africa;
and by so doing, to position the combined group for
accelerated growth;
- leverage Adcock`s footprint and customer base in the rest of
Africa with a broader and more complementary product offering;
and
- create a deeper pool of management talent to position the
combined group better for international expansion.
The Transaction is also likely to benefit Cipla India as it will provide it
with a robust and effective distribution partner with the intrinsic
capability to expand sales in South Africa and beyond.
4. Transaction implementation structure
4.1 For the reasons set out in paragraph 6, the board of directors of
Adcock ("Adcock Board") would prefer to implement the Transaction,
subject to the suspensive conditions set out in paragraph 7, by way of
a scheme of arrangement in terms of section 311 of the Companies Act,
61 of 1973, as amended (the "Act"), to be proposed by Adcock between
CMSA and the CMSA Shareholders (the "Scheme") pursuant to which the
Scheme Consideration, as defined in paragraph 5.1.1, will be payable
to the CMSA Shareholders.
4.2 If the Transaction is not implemented by way of the Scheme, Adcock
will implement the Transaction by way of a general offer in terms of
Chapter XVA of the Act (the "General Offer") at the General Offer
Consideration, as defined in paragraph 5.1.2, but otherwise on the
same terms and conditions, mutatis mutandis, as the Scheme, save that
the General Offer will be subject to a minimum acceptance threshold,
being acceptance by the holders of not less than 51% of the CMSA
Shares (including those at that time held by Adcock and/or its
subsidiaries), which condition may be waived in writing by Adcock on
the basis envisaged in paragraph 7.4.
4.3 If the Transaction is to be implemented by way of the Scheme and the
Scheme should not become operative by reason of a failure of any one
of the Scheme Conditions, as set out in paragraph 7.3, (i.e. other
than in relation to the General Conditions set out in paragraph 7.2),
Adcock shall extend an offer (the "Substitute Offer") to CMSA
Shareholders in terms of Chapter XVA of the Act at the Scheme
Consideration. The Substitute Offer will be made on the same terms and
conditions, mutatis mutandis, as the General Offer provided that the
Substitute Offer shall be subject to a minimum acceptance threshold,
being acceptance by the holders of not less than 90% of the CMSA
Shares other than those at the time of the issue of the Substitute
Offer held by Adcock and/or its subsidiaries, which condition may be
waived in writing by Adcock on the basis envisaged in paragraph 7.5.
4.4 Following the implementation of the Transaction -
4.4.1 assuming Adcock acquires the entire issued ordinary share
capital of CMSA, the listing of CMSA on the JSE will be
terminated; or
4.4.2 assuming Adcock acquires less than 100% of the issued ordinary
share capital of CMSA, the CMSA Shares will continue to be
listed on the JSE and CMSA will become a subsidiary of Adcock.
4.5 It is the intention of Adcock to invoke the provisions of section 440K
of the Act should the Transaction be implemented by way of the General
Offer or the Substitute Offer, and the General Offer or the Substitute
Offer, as the case may be, be accepted by CMSA Shareholders holding
more than 90% of the CMSA Shares in respect of which the offer is made
(that is, excluding those CMSA Shares held, at that time, by Adcock
and/or its subsidiaries).
5. Offer consideration
5.1 Before adjustment as set out below, if the Transaction is implemented
-
5.1.1 by way of the Scheme, the consideration payable will be an
aggregate amount of R2 125 000 000 subject to adjustment as set
out in paragraph 5.3 (the "Scheme Consideration"), which,
assuming that the entire issued share capital of CMSA consists
of 447 443 886 ordinary shares and that no further ordinary
shares have been or will be issued by CMSA, will equate to a
consideration, prior to adjustment, of approximately R4.75 per
CMSA Share to which scheme participants will become entitled on
implementation of the Scheme;
5.1.2 by way of the General Offer, the maximum consideration payable
(assuming Adcock acquires 100% of the issued share capital of
CMSA through the General Offer) will be an aggregate amount of
R2 125 000 000 subject to adjustment as set out in paragraph 5.3
(the "General Offer Consideration"), which, assuming that the
entire issued share capital of CMSA consists of 447 443 886
ordinary shares and that no further ordinary shares have been or
will be issued by CMSA, will equate to a consideration, prior to
adjustment, of approximately R4.75 per CMSA Share;
5.1.3 should the above assumptions regarding the number of ordinary
shares in the issued share capital of CMSA be incorrect, the
resultant offer price per CMSA Share will adjust accordingly.
5.2 The Scheme Consideration and the General Offer Consideration, as the
case may be, (collectively the "Offer Consideration") will be settled
in cash, subject to the Reinvestment Election discussed in paragraph
5.5 or, in the unlikely event the Contingency Equity Undertaking set
out in paragraph 5.6 is triggered, settled by way of the issue of new
ordinary shares ranking pari passu with the ordinary shares in the
share capital of Adcock ("Adcock Shares") as set out in paragraph 5.6.
5.3 The Offer Consideration will be -
5.3.1 increased by a notional amount equal to the interest that would
have accrued thereon at the publicly quoted basic prime
overdraft rate of interest per annum quoted from time to time by
Nedbank Limited ("Nedbank"), calculated from the date of receipt
of the required approval of the Transaction (either
unconditionally or subject to such conditions as Adcock may
accept) from the competition authorities in partial fulfilment
of the condition in paragraph 7.2.1 up until the date of payment
(the "Adjustment Amount"); and
5.3.2 decreased by the value of -
5.3.2.1 any dividend declared or distribution made by CMSA or
any subsidiary of CMSA to any person other than CMSA or
a wholly owned subsidiary of CMSA ("Outside
Shareholder") after 31 March 2009 and before the
settlement of the Offer Consideration, other than the
preference dividends payable in respect of the
preference shares issued by Inyanga Trading 386 (Pty)
Limited; and
5.3.2.2 any amount for which CMSA or any subsidiary of CMSA is
itself liable by way of taxes on such dividends or
distributions (that is, excluding any obligation on CMSA
or its subsidiaries to withhold any amount payable by
any Outside Shareholder including any holder of CMSA
Shares);
(collectively, the "Dividend Deduction")
5.4 The Offer Consideration (before taking into account the Adjustment
Amount or any Dividend Deduction) per CMSA Share of approximately
R4.75 represents a premium of -
5.4.1 35.7% to the closing price per CMSA Share on the JSE on 7 April
2009;
5.4.2 34.9% to the 30-day volume weighted average price per CMSA Share
calculated to 7 April 2009; and
5.4.3 68.6% to the 90-day volume weighted average price per CMSA Share
calculated to 7 April 2009.
5.5 Each CMSA Shareholder will be entitled, subject to availability and
without any obligation on the part of Adcock to ensure that same can
be accommodated, to request that all or a portion of the Offer
Consideration to which that CMSA Shareholder is entitled be settled by
way of the issue of Adcock Shares at a price equal to the volume
weighted average price at which the Adcock Shares have traded on the
JSE for the 30 trading days on which such trading has occurred in
Adcock Shares ("Trading Days") prior to the last practicable date
prior to the issue of the relevant offer or scheme document to CMSA
Shareholders (the "Reinvestment Election"), provided that the total
value of Adcock Shares so to be issued will not exceed 25% of the
aggregate Offer Consideration (the "Maximum Reinvestment Percentage").
Accordingly, the satisfaction of any Reinvestment Election will be
dependent upon the extent to which other CMSA Shareholders make such
Reinvestment Elections and to the extent that any CMSA Shareholder`s
Reinvestment Election cannot be satisfied in full, it will be scaled
down to the extent possible, on a pro rata basis. Adcock reserves the
right from time to time to increase the Maximum Reinvestment
Percentage from the initial level of 25%.
5.6 FirstRand Bank Limited, acting through its Rand Merchant Bank division
("RMB") and Nedbank, acting through its Corporate Banking division
(collectively, the "Funders") have underwritten facilities sufficient
to satisfy full settlement of that portion of the Offer Consideration
that is payable in cash to CMSA Shareholders, whether the Transaction
is implemented by way of the Scheme or by way of the General Offer
("Cash Portion of the Offer Consideration"), up to a maximum of R2 190
000 000.
Subject to -
a) none of the "Certain Funds Events" (details of which are set out in
the Firm Intention Notice, a copy of which is available from
Adcock`s sponsors, and which are summarised in paragraph 8)
occurring prior to the issue of the relevant scheme or offer
document to CMSA Shareholders; and
b) the requirements for the issue of the relevant scheme or offer
document to be issued to CMSA Shareholders as referred to in
paragraph 10 below being met,
the Funders will be required to issue guarantees covering the Cash
Portion of the Offer Consideration in full, on written notice by
Adcock ("Funding Guarantees"). These Funding Guarantees will guarantee
payment of an amount not exceeding R2 190 000 000, payment thereunder
being subject to usual conditions for guarantees of this nature,
including the fulfilment or waiver (with the prior consent of the
Funders) of all the conditions to which the Transaction and, as the
case may be, either the Scheme and the Substitute Offer or the General
Offer are subject, including those set out in paragraph 7.
In the unlikely event of the funding being withdrawn in the
circumstances of the occurrence of a Certain Funds Event prior to the
issue of the relevant offer or scheme document to CMSA Shareholders
and the issue of the Funding Guarantees, Adcock shall be obliged to
settle the entire Offer Consideration in full by way of an issue to
accepting CMSA Shareholders of Adcock Shares. The Adcock Shares will
be issued at a price equal to the volume weighted average price at
which Adcock Shares have traded on the JSE for the 30 Trading Days
prior to the last practicable date prior to the issue of the relevant
offer or scheme document to CMSA shareholders (the "Contingency Equity
Undertaking").
6. Rationale for the Scheme as the preferred implementation structure
6.1 It is the preference of Adcock to implement the Transaction by way of
the Scheme. Approval of the Scheme would require 75% of CMSA
Shareholders present and voting at the Scheme meeting to vote in
favour of the Transaction and the subsequent sanctioning of the Scheme
by the High Court. Following this High Court sanction and once all the
suspensive conditions are met, Adcock will acquire the entire issued
share capital of CMSA. Adcock will then not be obliged to maintain the
separate listing of CMSA, will have greater flexibility in relation to
the optimal deployment and configuration of the operations and assets
of the combined group, and will be able to extract the maximum
synergies and benefits resulting from the Transaction.
6.2 CMSA Shareholders will, subject to the Contingency Equity Undertaking,
be able to realise their entire holding in cash under either the
Scheme or the General Offer and will also, through the Reinvestment
Election contemplated in paragraph 5.5, be provided with an
opportunity to participate in the benefits of the combined group. The
benefits of the combined group will be reduced if Adcock is unable to
acquire the entire issued share capital of CMSA.
6.3 A co-operative process between the Adcock Board and the CMSA Board
will be more efficient and effective and should provide earlier and
greater certainty to CMSA, Adcock and their respective shareholders.
It is therefore the view of Adcock that the Scheme is the most
desirable transaction mechanism and will allow CMSA Shareholders to
assess the Transaction with minimal disruption to CMSA. Adcock
therefore believes that it is in the best interests of both Adcock
Shareholders and CMSA Shareholders that the CMSA Board agrees to the
proposal of the Scheme such that CMSA Shareholders are afforded the
opportunity to vote on the Transaction at the Scheme meeting.
6.4 In the event that the Transaction is implemented not by way of the
Scheme but by way of the General Offer, it is likely that CMSA will
become a listed subsidiary of Adcock. It is in Adcock`s view incumbent
on the CMSA Board to point out to CMSA Shareholders that in such
event, with a significant reduction in the free float of CMSA, the
market for CMSA shares is likely to be less liquid than is the case
currently. This may well have a negative impact on the future trading
price of CMSA Shares.
7. Suspensive conditions to the implementation of the Transaction
7.1 Whether implemented by way of the Scheme or the General Offer, the
Transaction will be subject to the fulfilment or waiver, as the case
may be, of the suspensive conditions in paragraph 7.2("General
Conditions"), on or before the date stipulated in the relevant
condition or, if no date is stated in any condition, by not later than
31 December 2009 or such other date as may be stipulated by Adcock in
writing to CMSA.
7.2 The General Conditions are the following -
7.2.1 the receipt of -
a) the requisite consents and approvals from -
(i) the relevant competition authorities as may be required
in law in order to propose and/or to implement the
Transaction, as contemplated in this announcement, in
South Africa; and
(ii) the requisite consents/approvals from the Securities
Regulation Panel ("SRP") (including without limitation
the consent sought from the SRP referred to in paragraph
10.3) and the JSE as may be required, in connection with
the issuing of the relevant scheme or offer document, for
Adcock to propose the Scheme and to make the Substitute
Offer or to make the General Offer (as the case may be),
as contemplated in this announcement,
unconditionally (or, if any such consents and/or approvals
are given on a conditional basis, subject to such conditions
being acceptable to Adcock), all prior to 15 October 2009;
and
b) all such other regulatory consents and/or approvals as may be
required in law in order to implement the Transaction, as
contemplated in this announcement, in South Africa;
7.2.2 if required by the JSE, a fairness opinion by an independent
advisor to be obtained by Adcock expressing the opinion that,
based on information provided and representations made by
Adcock, the Transaction is fair to Adcock Shareholders;
7.2.3 Adcock receiving written confirmation from Cipla India that the
contractual relationship between Cipla India and CMSA is
governed solely by the written supply agreement concluded
between Cipla India and CMSA on or about 26 September 2005 and
that such agreement will, after implementation of the
Transaction, continue in full force and effect between those
parties until at least 25 September 2025, on terms at least as
favourable to CMSA as those terms set out in Annexure 2 to the
"Limited Information Memorandum" issued by CMSA during or about
October 2005, and that the Transaction will not trigger, or if
so triggered will not result in the exercise of, any rights in
the hands of Cipla India or CMSA or any other party, other than
as may be approved in writing by Adcock, provided that Adcock
shall be entitled to waive this condition in whole or in part by
notice in writing to CMSA;
7.2.4 the approval of such resolutions as are required in order to
implement the Transaction (such as, without limitation, the
approval by Adcock Shareholders of the Transaction in terms of
the JSE Listings Requirements, the placing of the requisite
unissued shares in Adcock under the control of the Adcock Board
for the purposes of settling the share portion of the Offer
Consideration if necessary in terms of the Reinvestment
Election, the approval if necessary, of the issue of such
instruments (including if necessary preference shares) required
for the long term funding of the Transaction and the granting of
security therefor, and the granting of authority to the board of
Adcock to deal with all those matters necessary to implement the
Transaction) by the requisite majority of those Adcock
Shareholders entitled to vote at the general meeting of Adcock
Shareholders (the "Adcock General Meeting");
7.2.5 neither CMSA nor any of its directors nor any subsidiary of CMSA
having after 31 December 2007 and up to the Reference Date (as
defined below), and other than as fully and properly disclosed
by CMSA in its annual report for the period to 31 December 2007
or in its announcement of its annual results for the period
ended 31 December 2008 announced on 31 March 2009 having -
7.2.5.1 issued any authorised but unissued securities;
7.2.5.2 issued nor granted options in respect of any unissued
securities;
7.2.5.3 created or issued, or permitted the creation or issue
of, any securities carrying rights of conversion into or
subscription for other securities;
7.2.5.4 sold, disposed of or acquired, or agreed to sell,
dispose of or acquire, assets of a material amount;
7.2.5.5 entered into, or amended, any agreement otherwise than
in the ordinary course of business;
7.2.5.6 entered into any agreement (or any amendment to an
agreement) which imposes any material obligation on CMSA
or its subsidiaries, or which grants to any party a
right, that is triggered by the Transaction or any
component of the Transaction;
7.2.5.7 incurred any indebtedness having a value in excess of R5
million;
7.2.5.8 paid any dividend which is abnormal as to timing and/or
amount; nor
7.2.5.9 contravened any of the provisions of prevailing law
including, without limitation, the requirements of the
Securities Regulation Code on Takeovers and Mergers
("SRP Code");
provided that in the event of any such action or any such
contravention coming to the attention of Adcock this condition
shall be capable of waiver by Adcock by notice within a
reasonable period thereafter in writing to CMSA, without
prejudice to the rights of Adcock in such circumstances;
7.2.6 no fact or circumstance coming to Adcock`s attention at any time
up to the Reference Date that evidences a material misstatement,
fraud or material misrepresentation in relation to any
information published by CMSA prior to midnight on 31 March
2009, including without limitation the financial results for the
year ended 31 December 2008, provided that in the event of any
such fact or circumstance coming to the attention of Adcock this
condition shall be capable of waiver by Adcock by notice within
a reasonable period thereafter in writing to CMSA, without
prejudice to the rights of Adcock and/or Adcock in such
circumstances;
7.2.7 a) no registration of a Current Medicine, as defined below, in
the name of CMSA or its subsidiaries being suspended or
withdrawn or cancelled (and no notice being given in
anticipation of possible cancellation thereof) in terms of Act
101 of 1965, at any time up to the Reference Date, and b) no New
Competing Medicine, as defined below, being registered in terms
of Act 101 of 1965 (and no application for such registration
being made) in the name of any related party (as that term is
defined in the JSE Listings Requirements) of either CMSA or any
subsidiary of CMSA at any time up to the Reference Date,
provided that, in the event of any such suspension or withdrawal
or new registration or application coming to the attention of
Adcock, this condition shall be capable of waiver in whole or in
part by Adcock by notice within a reasonable period thereafter
in writing to CMSA, without prejudice to the rights of Adcock in
such circumstances, and for purposes of this condition the
following terms shall have the following meanings -
7.2.7.1 "Act 101 of 1965" means the Medicines and Related
Substances Act 101 of 1965;
7.2.7.2 "Current Medicine" means those medicines as at 31
January 2009 marketed or sold in the Republic of South
Africa by CMSA and/or its subsidiaries ("CMSA Current
Medicines"), together with those medicines which are
marketed and sold in South Africa at that date in
competition with those CMSA Current Medicines (as
demonstrated by reference to data published by IMS
Health Incorporated or its affiliates);
7.2.7.3 "New Competing Medicine" means any medicine (as
contemplated in Act 101 of 1965 which a) has the same
active pharmaceutical ingredient(s) as any such medicine
currently registered in terms of Act 101 in the name of
CMSA or any subsidiary of CMSA, and b) is not a Current
Medicine, as defined above;
7.2.8 the South African government not taking any further step, at any
time after the date hereof and up to the Reference Date, towards
the introduction of price regulation of any pharmaceutical
products by way of international benchmarking, provided that
Adcock shall be entitled to waive this condition in whole or in
part by notice in writing to CMSA; and
7.2.9 any event, matter or circumstance (or any combination of events,
matters or circumstances) having occurred prior to the Reference
Date that has or will result in -
7.2.9.1 the occurrence of an insolvency event in respect of
CMSA;
7.2.9.2 any material authorisation, consent, board or
shareholder resolution, licence, exemption, filing or
registration required for the continued conduct of CMSA
or any of its subsidiaries, of its businesses, ceasing
to be of full force and effect;
7.2.9.3 any material litigation, arbitration, administrative or
other proceedings being implemented or threatened
against the assets of CMSA or any of its subsidiaries,
or against Cipla India or any of its subsidiaries, in
which either a) an amount in excess of R50 000 000 is
claimed from CMSA or any of its subsidiaries or from
Cipla India or any of its subsidiaries; or b) which, if
successful, would threaten the continued conduct by CMSA
or any of its subsidiaries, or by Cipla India, of its
businesses;
7.2.9.4 no adverse judgement being handed down in respect of any
current litigation brought by or against any of CMSA or
any of its subsidiary companies, or Cipla India or any
of its subsidiary companies, at any time up to Reference
Date, in terms of which an amount in excess of R50 000
000 is required to be paid, or which threatens the
continued conduct by CMSA or any of its subsidiaries, or
by Cipla India, of its businesses;
7.2.9.5 CMSA ceasing to be a company with limited liability duly
incorporated in and validly existing under the laws of
the Republic of South Africa;
7.2.9.6 CMSA Shares not being listed on the JSE, or being
suspended from trading on the JSE,
as more fully set out in the Firm Intention Notice.
References in paragraph 7.2 above to "Reference Date" means the later
of a) the date on which all the conditions in paragraphs 7.2.1 to
7.2.4, (both inclusive) have been waived or fulfilled, as the case may
be, in their entirety; and b) the date immediately prior to the date
that, in the case of the Scheme, the condition in paragraph 7.3.2 or,
in the case of the General Offer, the condition in paragraph 7.4, or,
in the case of the Substitute Offer, the condition set out in
paragraph 7.5, has been fulfilled or waived in its entirety, and
provided that at midnight on that date none of the conditions in
paragraphs 7.2.5 to 7.2.9 (both inclusive) have failed due to (i) the
occurrence of any of the events, facts or circumstances identified
therein, and (ii) such occurrence not having been waived. Adcock was
at 7 April 2009, not aware of any fact or circumstance which would
cause any of the General Conditions to fail.
7.3 If the Transaction is implemented by way of the Scheme, the Scheme
will be subject to the fulfilment of the following suspensive
conditions, in addition to the fulfilment or waiver, as the case may
be, of the General Conditions by not later than 31 December 2009 or
such other date as may be stipulated by Adcock in writing to CMSA -
7.3.1 the approval of the Scheme by the requisite majority of Scheme
members, in terms of section 311(2) of the Act;
7.3.2 the sanctioning of the Scheme by the Court in terms of section
311(2) of the Act; and
7.3.3 the registration of a certified copy of the Order of Court
sanctioning the Scheme with the Companies and Intellectual
Property Registration Office in terms of section 311(6)(a) of
the Act;
(collectively, the "Scheme Conditions").
7.4 If the Transaction is implemented by way of the General Offer, the
General Offer will be subject, in addition to the fulfilment of the
General Conditions, to the fulfilment of the suspensive condition by
the earlier of 31 December 2009 or the 60th day after issue of the
offer document, or such other date as may be stipulated by Adcock in
writing to CMSA, that the General Offer is accepted by CMSA
Shareholders holding not less than 51% of the CMSA Shares (including
those at that time held by Adcock and/or its subsidiaries), which
condition may be waived in writing at the sole discretion of Adcock
(the "General Offer Condition").
7.5 If the Transaction is implemented by way of the Substitute Offer, the
Substitute Offer will be subject, in addition to the fulfilment or
waiver of the General Conditions, as the case may be, to the
fulfilment of the suspensive condition by the earlier of 31 December
2009 or the 60th day after issue of the offer document, or such other
date as may be stipulated by Adcock in writing to CMSA, that the
Substitute Offer is accepted by CMSA Shareholders holding not less
than 90% of the CMSA Shares (excluding those at the time of the issue
of the Substitute Offer held by Adcock and/or its subsidiaries), which
condition may be waived in writing at the sole discretion of Adcock
(the "Substitute Offer Condition")
7.6 As contemplated in paragraph 5.6, the Funders shall be entitled to
withdraw from the funding of the Transaction if a Certain Funds Event
occurs. If the Funders should withdraw from the funding of the
Transaction by virtue of a Certain Funds Event Adcock will
nevertheless be obliged to proceed with the Transaction save that the
Offer Consideration will be settled, as contemplated in paragraph 5.6,
by way of the issue of Adcock Shares.
7.7 Adcock reserves the right to waive (or extend the date required for
fulfilment of) any of the General Conditions, the Scheme Conditions or
the General Offer Condition in writing insofar as it is able and it is
lawful to do so.
8. Summary of Certain Funds Events
8.1 The Certain Funds Events are set out in full in the Firm Intention
Notice, which is available for inspection at the office of Adcock`s
Sponsor. Paragraph 8.2 below sets out a summary of these Certain Funds
Events.
8.2 A Certain Funds Event shall have occurred if, prior to the issue of
the Funding Guarantees -
8.2.1 any event, matter or circumstance having occurred that has or
will result in -
a) the occurrence of an insolvency event in respect of, inter
alia, Adcock, Adcock Ingram Critical Care (Proprietary)
Limited, Adcock Ingram Intellectual Property (Proprietary)
Limited or Adcock`s material subsidiaries, currently being
Adcock Ingram Healthcare (Proprietary) Limited (such entities
referred to collectively as the "Relevant Entities");
b) any material authorisation, consent, board or shareholder
resolution, licence, exemption, filing or registration
required for the continued conduct of the businesses of
Adcock or of any of the Relevant Entities, ceasing to be of
full force and effect;
c) any material litigation, arbitration, administrative or other
proceedings being implemented or threatened against the
assets of Adcock or its affiliates in which either an amount
in excess of R100 000 000 is claimed or which, if successful,
would threaten the continued conduct of the businesses of
Adcock or of any of its affiliates;
d) any of Adcock or the Relevant Entities ceasing to be a
company with limited liability duly incorporated in and
validly existing under the laws of the South Africa;
e) Adcock Shares not being listed on the JSE or having been
suspended from trading on the JSE;
8.2.2 the relevant scheme or offer document to be issued to CMSA
Shareholders -
8.2.2.1 does not reflect the terms of the Transaction and either
of the Scheme and the Substitute Offer or the General
Offer (as the case may be), as set out in this
announcement; or
8.2.2.2 is not subject to the fulfilment or waiver of any of the
suspensive conditions to which the Transaction and
either of the Scheme and the Substitute Offer or the
General Offer (as the case may be), are subject, as set
out paragraph 7 of this announcement,
subject only to such amendments, waivers, extensions of time,
acceptances, additions or supplements as the Funders may approve
in writing;
8.2.3 a reduction in the consolidated earnings before interest, tax,
depreciation and amortisation ("EBITDA") of Adcock for the most
recently completed rolling 12-month period (as set out in the
most recent consolidated management accounts of Adcock) to 90%
or less of the pro forma EBITDA of Adcock for the 12-month
period ended 30 September 2008 of R1 073 214 000;
8.2.4 a reduction in the shareholders` funds of Adcock ("NAV"), as
determined in accordance with International Financial Reporting
Standards (as set out in the most recent consolidated management
accounts of Adcock), to 90% or less of the NAV of Adcock as at
30 September 2008 of R1 628 391 000;
8.2.5 a reduction in the Adcock share price (as measured by the 10day
volume weighted average price of Adcock Shares) below R25 per
Adcock share;
8.2.6 an increase in Adcock`s pro forma gross consolidated
indebtedness (taking into account Adcock`s general banking
facilities and total net debt of CMSA) above R950,000,000; and
8.2.7 the South African basic prime overdraft rate of interest quoted
from time to time by Nedbank Limited increasing above 17.5%.
9. Due diligence
The Transaction is not conditional on Adcock being granted access to CMSA`s
books and records and personnel for purposes of a due diligence
investigation. To the extent CMSA permits Adcock to perform a due diligence
investigation Adcock would be prepared to revisit certain conditions set
out in paragraph 7.2.
Adcock nevertheless reserves its rights in terms of the SRP Code in
relation to any information provided by CMSA to third parties.
10. Transaction documents and circulars
10.1 In the event the Transaction is implemented by way of the Scheme,
Adcock will apply to Court for leave to convene the Scheme Meeting as
soon as Adcock has derived a satisfactory level of certainty regarding
the timing of the fulfilment of the General Condition set out in
paragraph 7.2.1, being the condition in respect of regulatory
approvals. Adcock will thereafter procure the posting of a circular to
CMSA Shareholders containing full details of the Scheme, the Order of
Court and the notice of scheme meeting, and, as appropriate, details
of the Substitute Offer (the "Scheme Circular"). For clarity, the
Scheme Circular will not be posted before the date on which Adcock has
received approval (either unconditionally or subject to such
conditions as Adcock and, if no Certain Funds Event has occurred, the
Funders, may approve) of the consents and/or approvals contemplated in
section (a) of paragraph 7.2.1.
10.2 In the event the Transaction is implemented by way of the General
Offer, Adcock intends to issue the relevant offer documentation to
CMSA Shareholders as soon as Adcock has derived a satisfactory level
of certainty regarding the timing of the fulfilment of the General
Condition set out in paragraph 7.2.1, being the condition in respect
of regulatory approvals. Adcock will procure the posting of a circular
to CMSA Shareholders containing full details of the General Offer (the
"General Offer Circular"). For clarity, the General Offer Circular
will not be posted before the date on which Adcock has received
approval (either unconditionally or subject to such conditions as
Adcock and, if no Certain Funds Event has occurred, the Funders, may
approve) of the consents and/or approval contemplated in section (a)
of paragraph 7.2.1.
10.3 Adcock has requested the SRP to grant consent, as one of the consents
and approvals required in order to fulfil the condition in paragraph
7.2.1, (either unconditionally or subject to such conditions as Adcock
may approve) to any non-compliance with Rule 27.1 of the SRP Code
(which requires posting of the offer document within 30 days of the
announcement of a firm intention to make an offer) as may arise from
the proposal of the Transaction as contemplated in this announcement.
Interested parties, including CMSA, will be entitled to make
submissions to the SRP in respect of Adcock`s request before 24 April
2009 at 2 Sherborne Road, Parktown, Johannesburg or through facsimile
at +27 11 482 5635 or email at richardc@srpanel.co.za.
10.4 Unless the funding has been withdrawn in the unlikely circumstances
contemplated in paragraph 5.6, the Funding Guarantees shall be issued
at the time of or before the issue of the above offer documentation.
From the date of issue of the Funding Guarantees, the funding of the
Cash Portion of the Offer Consideration will no longer be subject to
withdrawal by virtue of the occurrence of a Certain Funds Event.
10.5 The circular to Adcock Shareholders, containing full details of the
Transaction and incorporating the notice of the Adcock General
Meeting, will be posted to Adcock Shareholders on the same day whereon
the Scheme Circular or General Offer Circular, as the case may be, is
posted to CMSA Shareholders.
11. Categorisation of the Transaction for Adcock
11.1 The Transaction is categorised as a category 1 transaction for the
purposes of the JSE Listings Requirements.
11.2 In terms of the JSE Listings Requirements and as a suspensive
condition to the Transaction (referred to in paragraph 7.2.4), Adcock
Shareholders are required to consider and approve resolutions to be
proposed at the Adcock General Meeting as may be required in order to
implement the Transaction, in terms of which Adcock Shareholders will
approve the Transaction, place the necessary number of unissued Adcock
Shares under the control of the Adcock Board for the purposes of
settling the share portion of the Offer Consideration, if necessary in
terms of the Reinvestment Election, approve the issue of such funding
instruments (including if necessary preference shares) required for
the Transaction and the granting of security therefor, and authorise
the board of Adcock to deal with all those matters necessary to
implement the Transaction.
12. Irrevocable undertakings
The following major shareholders in CMSA, namely Stanlib Asset Management
Limited, Allan Gray Limited, Sanlam Investment Management (Proprietary)
Limited and Sanlam Investment Management (a division of Sanlam Life
Insurance Limited), have provided Adcock with written undertakings -
12.1 to accept, or to advise their clients to accept, the General Offer in
respect of CMSA Shares; and
12.2 to vote their CMSA Shares or, as the case may be, to advise their
clients to vote their CMSA Shares in favour of the Scheme, or, as the
case may be, to accept, or to advise their clients to accept, the
Substitute Offer in respect of CMSA shares,
representing in aggregate 28.9% of the entire issued share capital of CMSA.
13. Cash confirmation and funding in respect of the Transaction
The Funders have confirmed, on the basis set out in paragraph 5.6, that
Adcock has resources available to it, sufficient to satisfy full
acceptances of the Cash Portion of the Offer Consideration in a maximum
amount of up to R2 190 000 000. Adcock has secured this funding on arms`
length, market related terms from the Funders on the basis set out in
paragraph 5.6 above.
Adcock will release a further announcement, on the day prior to the posting
of the Scheme Circular or Offer Circular to CMSA Shareholders, as the case
may be at the relevant time, confirming that the Funding Guarantees have
been issued (with the consequence that the funding is no longer subject to
withdrawal on the occurrence of any Certain Funds Event), or,
alternatively, that the Contingency Equity Undertaking has become
operative.
14. Existing holding of CMSA Shares
Neither Adcock nor any of its directors, with the exception of Andrew Hall,
currently hold or control any shares in CMSA.
Andrew Hall, Adcock`s Chief Financial Officer, currently holds -
- 15 563 shares in a company by the name of Majestic Trading, which Adcock
understands constitutes an indirect interest on the part of Andrew Hall
equivalent to approximately 0.3% of the entire issued share capital of
CMSA; and
- 11 000 CMSA Shares purchased by him in March 2006.
15. Option holders in CMSA
If and to the extent required in law, an appropriate offer will be made to
the holders of convertible securities (as contemplated under the SRP Code),
including holders of options in CMSA.
16. Effects of the Transaction on an Adcock Shareholder
The pro forma financial effects of the Transaction on an Adcock Shareholder
will be released on SENS and published in the press on the date of issue of
the circular to Adcock Shareholders referred to in paragraph 10.5.
17. Important dates and times
A further announcement will be made in due course containing, inter alia,
the proposed transaction implementation structure.
18. Directors` responsibility statement
The directors of Adcock, collectively and individually, accept full
responsibility for the accuracy of the information given in this
announcement and certify that to the best of their knowledge and belief
there are no facts that have been omitted which would make any statement
false or misleading, and that all reasonable enquiries to ascertain such
facts have been made and that the announcement contains all the information
required by law and the JSE Listings Requirements.
19. Opinions and recommendations of the Adcock Board
The Adcock Board has carefully considered the rationale for the
Transaction, and considers the merits for combining the two companies to be
compelling. The directors of Adcock recommend that all Adcock Shareholders
vote in favour of the resolutions to be proposed at the Adcock General
Meeting referred to in paragraphs 7.2.4 and 11.2, and intend to do so in
respect of all Adcock Shares owned or controlled by themselves.
20. Cautionary announcement regarding Adcock
Adcock Shareholders are advised to exercise caution when dealing in their
respective Adcock securities until such time as a further announcement is
made.
9 April 2009
Midrand
Financial Adviser, Debt Adviser and Sponsor to Adcock
Deutsche Securities (SA) (Proprietary) Limited
Legal Advisers to Adcock
Read Hope Phillips Thomas & Cadman Inc.
Transaction Communication Adviser to Adcock
Brunswick South Africa Limited
Joint Debt Structurers and Mandated Lead Arrangers
FirstRand Bank Limited, acting through its Rand Merchant Bank division
Nedbank Limited, acting through its Corporate Banking division
Legal advisers to the Joint Debt Structurers and Mandated Lead Arrangers
Werksmans Attorneys Incorporated
Date: 09/04/2009 07:05:04 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
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