| Mon 23 Nov 2009, 17:23 | | AIP - Adcock Ingram Holdings - Proposed acquisition of Ayrton Drug Manufacturing |
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AIP
AIP
AIP - Adcock Ingram Holdings - Proposed acquisition of Ayrton Drug Manufacturing
Limited ("Ayrton")
Adcock Ingram Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 2007/016236/06
Share code: AIP
ISIN: ZAE000123436
("Adcock")
Proposed acquisition of Ayrton Drug Manufacturing Limited ("Ayrton")
1. Introduction
Holders of ordinary shares in Adcock ("Adcock shareholders") are advised
that Adcock has today released an announcement in Ghana advising holders of
the issued ordinary shares in Ayrton ("Ayrton shareholders") that Adcock
has delivered a letter to the board of directors of Ayrton in terms of
which Adcock has specified its firm intention to make an offer to acquire
the entire issued ordinary share capital of Ayrton, a Ghanaian
pharmaceutical company, subject to obtaining a minimum of 51% of the
company ("the Transaction"). The text of this announcement is attached
hereto.
Ayrton is a company incorporated and registered in Ghana and listed on the
Ghana Stock Exchange ("GSE"), with a market capitalisation at the close of
business on 18 November 2009 of 27.95 million Ghanaian Cedi, equivalent to
ZAR 144.95 million at the rate of exchange prevailing on that date.
2. Nature of business of Ayrton
Ayrton is a pharmaceutical company that is committed to manufacturing high
quality medicines at affordable prices, with a view to extending and
enhancing human life. It manufactures a wide range of pharmaceuticals which
are distributed in the form of tablets, syrups, capsules, powders,
ointments and creams. Its product range includes Paracetamol Syrup, Virol
and Teedar.
Ayrton was adjudged the leading company in the Ghanaian Pharmaceutical and
Healthcare Sector for the year 2004, and was admitted to membership of the
Ghana Club 100 in 2005. The Ghana Club 100 is organised by the Ghana
Investment Promotion Centre and is a selection of the top 100 companies in
Ghana, based on a weighting of various parameters including turnover, asset
base and profitability.
3. Rationale
3.1 Introduction of Adcock`s portfolio of products into Ghana
Adcock has a large basket of products, which cover several therapeutic
categories. Through the Ayrton acquisition Adcock would have the
opportunity to introduce a range of products into the Ghanaian market.
Adcock would benefit from Ayrton`s knowledge of the local market in
selecting suitable products. Adcock`s cost effective manufacturing
facility in India will allow it to compete effectively in the West African
market and lastly Ayrton will also have the opportunity to leverage
Adcock`s multi-national relationships into West Africa.
3.2 Marketing:
Together with Ayrton`s knowledge of the local and surrounding markets and
Adcock`s vast experience in marketing and sales, the acquisition would
provide a mutually beneficial partnership that would ensure Adcock`s
successful entry into West Africa.
3.3 High quality manufacturing:
Adcock is in the final stages of upgrading its manufacturing facilities to
international standards. The facility in Bangalore, India, has already been
accredited by the relevant United Kingdom and Australian authorities.
Adcock would thus be introducing products of the highest quality into the
West African market.
3.4 Regulatory affairs:
With the help of Ayrton`s regulatory knowledge of the local and surrounding
markets and Adcock`s large regulatory team, the efficient submission of
dossiers will ensure a faster entry into several markets.
3.5 Pharmaceutical industry:
The implementation of Adcock`s standards, processes and procedures into
Ayrton will benefit the overall West African market.
3.6 Antiretroviral:
Adcock has developed a range of generic antiretroviral products which are
currently marketed in South Africa. Adcock`s strategy would be to introduce
this range via the Ayrton acquisition into the West African markets.
4. Categorisation of the Transaction for Adcock
Adcock`s intended offer to Ayrton shareholders is conditional, inter alia,
on the acquisition of at least 51% of the issued share capital of Ayrton.
The aggregate consideration that would be payable by Adcock for 51% of the
issued share capital of Ayrton, calculated at the rate of exchange ruling
at the close of business on 18 November 2009, is ZAR 91 million and for
100% of the issued share capital of Ayrton is ZAR 178.42 million. In terms
of the Listings Requirements of the JSE Limited, the Transaction would be
categorised below a category 2 transaction.
Should the Transaction be implemented, Ayrton will be constituted as a
subsidiary of Adcock and its annual financial statements will be
consolidated by Adcock.
5. Financial effects
The financial effects of the Transaction on Adcock are not significant.
6. Further announcements
Adcock shareholders will be kept informed of the progress in regard to the
Transaction by way of further announcements on SENS.
Midrand
23 November 2009
Financial adviser and sponsor
Deutsche Securities (SA) (Proprietary) Limited
Legal adviser
Read Hope Phillips Thomas & Cadman Inc.
"Announcement of a firm intention by Adcock to make an offer to acquire at least
51% of the entire issued ordinary share capital of Ayrton Drug Manufacturing
Limited ("Ayrton") ("the Offer")
1. Introduction
Holders of ordinary shares in the issued share capital of Ayrton ("Ayrton
shareholders") are advised that Adcock has delivered a letter ("firm
intention letter") to the board of directors of Ayrton ("the Ayrton Board")
in terms of which Adcock has specified its firm intention to make an offer
to acquire at least 51% of the entire issued ordinary share capital of
Ayrton ("Ayrton shares") ("the Transaction").
The Offer, which is subject to the fulfilment or waiver of the conditions
set out in paragraph 4 below, will be implemented by way of a general offer
in terms of the Ghanaian Securities and Exchange Commission Code on
Takeovers and Mergers ("the Takeovers Code").
As at the date of this announcement, Adcock and its subsidiaries ("Adcock
Group") do not hold any shares in Ayrton.
2. Background and Rationale
2.1 Information on Adcock
Adcock began as the EJ Adcock Pharmacy in Krugersdorp, South Africa, 119
years ago. Adcock was listed on the main trading board of the predecessor
of the JSE Limited ("JSE") in 1950 before it became a wholly-owned
subsidiary of Tiger Brands Limited ("Tiger Brands") and was subsequently
delisted from the JSE in 2000. Adcock re-listed on the main board of the
JSE on August 25, 2008 at a share price of ZAR33.50 with approximately
172.6 million ordinary shares in issue.
Adcock has a market capitalisation of about ZAR 8.9 billion and has a 10%
share of the private pharmaceutical market in South Africa. The unbundling
from Tiger Brands and subsequent listing presented Adcock with
opportunities that enabled it to drive its vision of being recognised as a
leading, world-class, branded healthcare company. Adcock looks forward to
pursuing organic growth opportunities and acquisitions in selected markets
and developing exportable competencies.
Adcock has a number of divisions, each delivering essential services to a
wide customer base, as set out below:
Prescription and Over the Counter ("OTC")
Adcock provides an extensive portfolio of branded and generic medicines in
the following health disciplines - cardiovascular; central nervous system;
dermatology; diabetes; ear, nose and eye preparations; feminine health; and
analgesics. Its prescription brands include Myprodol and Synap Forte. It
also has a strong presence in the OTC market in South Africa, where an
independent industry analysis has shown that every second OTC brand sold in
South Africa is an Adcock product. The portfolio range in the OTC market
includes therapeutic products for coughs, colds, flu and analgesics. Some
of the leading brands include Corenza C, Panado, Vita-thion and Bioplus.
Critical Care Division
Adcock Ingram Critical Care is South Africa`s largest supplier of hospital
and critical-care products, blood systems and accessories, as well as
products used for renal dialysis and transplant medication. This division
has a 60 year relationship with Baxter Healthcare S.A. Adcock, through the
Scientific Group (Proprietary) Limited ("Scientific Group"), also supplies
established brand name consumables and equipment to medical, research and
pathology laboratories.
The Scientific Group is gaining an ever-increasing share of the medical
diagnostics market in South Africa.
Consumer Care Division
Adcock Ingram Consumer Care provides a wide range of personal care, baby
care and OTC medicines that are sold through foodstores and pharmacies.
Many of the products in this portfolio enjoy significant market share in
South Africa and are found in most consumers` homes in South Africa.
Leading brands include Panado, Compral and Citro Soda.
International Division
Adcock`s International Division manages all exports of pharmaceutical and
hospital products to countries outside of South Africa. Currently, Adcock
partners with distributors in Africa to sell and market Adcock products.
Where required, Adcock prepares product dossiers for registration in those
countries and products for private label/ house brand use. Adcock also
assists with needs analysis and training for new, specialised healthcare
facilities (e.g. renal care units).
Adcock`s team of export managers has a wealth of experience. Furthermore,
the team has access to expertise and contacts across the Adcock Group.
Currently, Adcock has reach into the following markets: West Africa, East
Africa, Indian Ocean Islands and the Southern African Development
Community.
2.2 Rationale for the Transaction
The Transaction is in line with Adcock`s stated strategy to expand into the
rest of Africa.
Adcock believes that the Transaction will benefit Ayrton. The benefits to
Ayrton include -
2.2.1 Access to existing Adcock portfolio:
Adcock has a large basket of products, which cover several
therapeutic categories. Ayrton would have the opportunity to
access therapeutic categories in respect of which it currently
has little or no exposure. Adcock`s cost effective manufacturing
facilities in India will allow Ayrton to compete more effectively
in the Ghanaian market. Ayrton`s knowledge of the Ghanaian
market would be valuable in identifying the right products for
introduction to the broader West African market.
2.2.2 Research and development:
Ayrton would have access to Adcock`s World Health Organisation
accredited research and development facilities, in order to
develop specific products for the West African market.
2.2.3 High quality manufacturing:
Adcock is in the final stages of upgrading its manufacturing
facilities to international standards. Adcock`s facility in
Bangalore, India, is already accredited by the relevant United
Kingdom and Australian authorities. Ayrton would have access to
expertise and experience in the implementation of international
good manufacturing practices.
2.2.4 Marketing:
Ayrton would have access to Adcock`s extensive marketing
capabilities and experience.
2.2.5 Regulatory affairs:
Adcock has over twenty dedicated regulatory affairs personnel,
with knowledge of and experience in the regulatory requirements
in a number of African countries.
2.2.6 Pharmaceutical industry:
Adcock`s knowledge of, and experience in, all aspects of the
pharmaceutical industry will be shared with Ayrton. The
implementation of Adcock`s pharmaceutical standards, processes
and procedures will benefit the West African pharmaceutical
market.
2.2.7 Antiretrovirals:
Adcock has developed a range of generic antiretroviral products
which are currently marketed in South Africa. Adcock`s strategy
would be to introduce this range via Ayrton into the West African
market.
3. Transaction terms
The Offer will be for an aggregate consideration equal to GHCents (USD)
0.1600 (sixteen Ghanaian pesewa) per Ayrton share ("the Offer
Consideration") to be settled in cash. The Offer will be for the entire
shareholding of each Ayrton shareholder, but Adcock will accept such lesser
number of Ayrton shares that the Ayrton shareholder, to whom the Offer is
made, may wish to tender in respect of the Offer.
The average of the highest weekly prices of Ayrton shares for the 26 weeks
prior to 18 November 2009 is GHCents (USD) 0.1519 (fifteen comma nineteen
Ghanaian pesewa).
It is Adcock`s intention to maintain the listing of Ayrton on the Ghana
Stock Exchange ("GSE"), unless the implementation of the Offer results in
Ayrton failing to satisfy the requirements of the GSE in order to maintain
a listing on the GSE.
In the event that the implementation of the Offer results in Ayrton failing
to satisfy the requirements of the GSE to maintain a listing on the GSE,
Ayrton will apply to the GSE to be delisted. Should Ayrton become an
unlisted company, the liquidity of the market for its shares will be
substantially diminished.
4. Conditions applicable to the Offer
4.1 General Conditions
The Transaction is subject, inter alia, to the express conditions that
Adcock acquires at least 51% of the entire issued ordinary share capital of
Ayrton and the right to appoint the majority of the Ayrton Board.
4.2 Suspensive Conditions
The Transaction will be conditional on, inter alia, the fulfilment or
waiver, as the case may be, of the suspensive conditions ("Suspensive
Conditions") that -
4.2.1 all such regulatory approvals as may be required in law or are
advisable to conclude and implement the Transaction will have
been obtained, either unconditionally or subject to such
conditions as Adcock may in its entire discretion approve in
writing, including, without limitation, such approvals as may be
required of the Ghanaian Securities and Exchange Commission
("SEC") and the GSE, the South African Reserve Bank, relevant
competition authorities and the JSE;
4.2.2 the board of directors of Adcock ("the Adcock Board") will have
unconditionally resolved to approve the making of the Offer and
the Transaction;
4.2.3 Adcock will have completed, to its entire satisfaction, a
confirmatory legal, financial and operational due diligence
investigation of Ayrton and its subsidiary and associated
companies (collectively "the Ayrton Group") and its business,
affairs and prospects;
4.2.4 the Transaction will not have triggered, or if so triggered will
not have resulted in the exercise of any rights conferred on any
supplier, licensor, lender or other contractual counterpart to
any member of the Ayrton Group, other than as may be approved in
writing by Adcock in its discretion;
4.2.5 Adcock will have concluded with each of Mr. Samuel Adjepong and
Mrs. Belinda Opoku -
4.2.5.1 a new service agreement;
4.2.5.2 a share retention agreement in terms of which he/she agrees (i)
to grant Adcock a right of first refusal in respect of any Ayrton
shares which he/she may hold or come to hold after implementation
of the Transaction ("Remaining Ayrton Shares") and/or (ii) to
retain and not sell the balance of his/her Remaining Ayrton
shares for a period stipulated by Adcock; and
4.2.5.3 non-compete agreements restraining each of them from competing in
any way with the Ayrton Group (for a period stipulated by
Adcock), whilst employed by Ayrton or whilst a shareholder in
Ayrton,
as applicable, on terms acceptable to Adcock in its discretion;
4.2.6 an offer document giving effect to the Offer ("the Offer
Document"), the agreements contemplated in 4.2.5 and all other
documents required to give effect to the Transaction
(collectively "the Transaction Documents") will have been
finalised, executed and concluded and Adcock will have received
written opinions, to Adcock`s satisfaction, in relation to the
Transaction Documents, including as to validity and
enforceability of the Transaction Documents, from Ghanaian
counsel appointed by Adcock;
4.2.7 no fact or circumstance will have come to Adcock`s attention at
any time up to the date and time of the fulfilment of the last of
the Suspensive Conditions in 4.2.1 to 4.2.5, inclusive, that
evidences a material mis-statement or material omission, fraud or
material misrepresentation in relation to any information
furnished to Adcock pursuant to the due diligence investigation
referred to in 4.2.3 and the preliminary due diligence
investigation conducted by Adcock of the Ayrton Group prior to
the date hereof;
4.2.8 the Ayrton Group will not, from the date of the firm intention
letter, have incurred or become committed to incur any capital
expenditure exceeding GHCents (USD) 100 000 (one hundred thousand
Ghanaian Cedi), without the prior written consent of Adcock;
4.2.9 no -
4.2.9.1 breach of any obligation, representation and/or warranty
contained in any of the Transaction Documents; and
4.2.9.2 material adverse change,
will have occurred as at the date and time of the last of
the Suspensive Conditions in 4.2.1 to 4.2.5, inclusive, to
be fulfilled.
4.3 Material adverse change
For the purpose of 4.2.9 above, "material adverse change" means the
existence or coming to light of facts or circumstances, including the
existence or coming to light of any claims against or liabilities of any
member of the Ayrton Group, which in the reasonable opinion of Adcock has,
or is reasonably likely to have, a material adverse effect on the business,
operations, condition (financial or otherwise), assets, value or prospects
of any member of the Ayrton Group. For purposes of this definition, a loss,
liability, expense or diminution in value of GHCents (USD)145 000 (one
hundred and forty five thousand Ghanaian Cedi) or more would be deemed to
be material.
4.4 Waiver of conditions
Adcock shall be entitled, without prejudice to any other rights which it
may have at law, to waive fulfilment of any of the conditions set out in
4.1 and 4.2 above, on written notice to that effect to Ayrton.
5. Market information
The Offer Consideration represents a premium of -
5.1 23.08% to the closing price per Ayrton share on the GSE on 18 November
2009; and
5.2 20.55% to the 30 - day volume weighted average price per Ayrton share
calculated to the close of business on 18 November 2009.
6. Shareholder support
Adcock has received (1) written undertakings to accept, or to advise that
the Offer be accepted; or (2) written confirmation of support in respect of
the Offer, in respect of at least 52.37% of the entire issued ordinary
share capital of Ayrton.
7. Cash confirmation
Deutsche Securities (SA) (Proprietary) Limited, (who have been appointed by
Adcock as its South African financial adviser in respect of the
Transaction) has confirmed receipt of written confirmation from Adcock`s
auditors, Ernst & Young Inc., that Adcock has resources available to it,
sufficient to satisfy full acceptances of the Offer Consideration in a
maximum amount of up to GHCents (USD)34.4 million (thirty four million and
four hundred thousand Ghanaian Cedi), being the amount which will be
payable by Adcock if the Offer is accepted in respect of the entire issued
ordinary share capital of Ayrton (namely 215 million Ayrton shares) (being
an amount, expressed in South Africa Rands ("ZAR") as at 18 November 2009
and based on the exchange rate of ZAR 5.1867 / GHCents (USD) 1.00, equal to
ZAR 178.423 million) ("the Offer Consideration").
8. Opinions and undertakings
The Adcock Board has carefully considered the rationale for proposing the
Transaction, and considers the merits of acquiring a controlling interest
in Ayrton to be compelling.
In accordance with the provisions of Rule 10 of the Takeovers Code the
Ayrton Board is required to appoint an independent adviser to advise the
Ayrton Board as to the fairness of the Offer.
9. Documentation and further announcements
The salient dates and times pertaining to the Offer will be provided in a
further announcement and in the Offer Document. The Offer Document
incorporating a form of acceptance, surrender and transfer, will be posted
to all Ayrton shareholders after it has been submitted to and approved by
the SEC.
Accra
23 November 2009
Financial adviser and sponsor to Adcock in South Africa
Deutsche Securities (SA) (Proprietary) Limited
Legal adviser to Adcock in South Africa
Read Hope Phillips Thomas & Cadman Inc
Legal adviser to Adcock in Ghana
Bentsi-Enchill Letsa & Ankomah
Financial adviser to Adcock in Ghana
First Atlantic Merchant Bank Ltd"
Date: 23/11/2009 17:23:08 Produced by the JSE SENS Department.
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