Pharma expansion: Natco to acquire major stake in South Africa’s Adcock Ingram, firm to go private
India’s Natco Pharma will acquire significant stakes in South African pharmaceutical giant Adcock Ingram in a deal valued at R4.2 billion, paving the way for the 135-year-old firm to become a privately held entity jointly owned by Natco and Bidvest, which will remain the majority shareholder.The decision followed a meeting of Adcock Ingram shareholders that approved Natco’s proposal to acquire all ordinary shares in the company, PTI reported. Natco had made a firm offer in July this year, as announced in a statement on the Johannesburg Securities Exchange (JSE) on Friday.Natco’s offer in July had triggered a 20 per cent jump in Adcock Ingram’s share price. According to the statement, Natco Pharma South Africa will acquire all ordinary shares in Adcock Ingram other than those already held by Natco, shares currently owned by Bidvest, and treasury shares of Adcock Ingram.More than 98 per cent of Adcock Ingram shareholders voted in favour of the Natco offer, after which the company will be delisted from the JSE.Founded in 1890 as a small pharmacy, Adcock Ingram has grown into a leading South African pharmaceutical company offering a wide range of prescription, over-the-counter (OTC), consumer, and hospital products, with several brands having become household names across South Africa.“As a proudly South African company, our focus lies not only in healthcare but also in the value we add to society through environmental protection, community upliftment, and philanthropy,” the company said on its website.Adcock Ingram told Moneyweb that it had ruled out any immediate shake-up to its product portfolio following Natco’s stake acquisition. The company said operations would continue as usual, and no brands would be discontinued unless it was economically necessary.The company said that its partnership with Natco Pharma would help it expand into markets beyond Southern Africa, where regulatory controls on medicine prices have limited its growth.“In the consumer segment, we have made significant progress in the personal care market, which is not price-regulated. However, our strategy, from a regulatory and risk perspective, has been to concentrate on the Southern African market, as we would lack economies of scale in territories further afield,” said Adcock Ingram CFO Dorette Neethling.“Support from a strong, vertically integrated, and globally resourced shareholder like Natco will help with portfolio expansion, particularly in the generics segment,” Neethling added.Analysts had earlier observed that Adcock Ingram’s performance was constrained by the sluggish South African economy despite its recent expansion into the informal consumer segment.Neethling also said that the proposed transaction would benefit the company by allowing it to operate privately under two large shareholders, providing flexibility and efficiency. “The potential transaction would allow Natco to strengthen its presence in South Africa and provide eligible Adcock Ingram shareholders with an opportunity to realise value now,” she said.Natco said the deal would give it a strong foothold in the Southern African market. “The proposed transaction will provide Natco Pharma with a well-established entry into the Southern African market,” Natco CEO and vice-chair Rajeev Nannapaneni said earlier.“It will also allow Natco Pharma to tap into new revenue streams and expand our footprint in one of the largest and growing emerging markets, while providing a gateway to the African continent,” Nannapaneni added.Adcock Ingram Group CEO Andrew Hall said the partnership with Natco would ultimately benefit South African consumers. “Adcock Ingram will benefit from a partnership with a research-focused, innovative, and vertically integrated pharmaceutical company, and over time South Africans will be beneficiaries of wider access to affordable medicines,” Hall said when the offer was announced.
