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Johannesburg - Shares in Adcock Ingram [JSE:AIP] fell to their weakest level in seven months on Tuesday, extending their decline into a third day after it became clear a $1.2bn bid for the drugmaker by Chile's CFR Pharmaceuticals is set to fail.
Adcock shareholder Bidvest Group, which opposed CFR's takeover, last week raised its stake to 34.5%, enough to unilaterally vote down CFR's offer of R74.50 a share.
Adcock, South Africa's second-largest drugmaker, is to hold urgent talks with CFR following Bidvest's buying spree and the Santiago-based company is widely expected to drop its stock and cash takeover offer.
Investors were betting Bidvest is unlikely to extend its 70 rand per share offer to remaining shareholders.
"Given the fact that the immediate prospects of a control premium have fallen away, it is perfectly understandable that the share price would be weak because the price it was trading at was on the expensive side of its fair value," said Wilhelm Hertzog, a portfolio manager at Cape Town-based RE:CM.
But investors are unfairly pessimistic about the nation's biggest over-the-counter drugs makers, according to Thomson Reuters StarMine. Adcock should be trading at about R73 based its most likely earnings growth trajectory over the next five years.
Adcock has shed nearly R1bn of value since Friday - when it also warned first-half profit likely fell more 20% as the weaker rand currency pushed up the costs of imported raw materials in a market where consumers are spending warily.
It was down 1.7% at R61.95 at 10:34 GMT, recouping some losses after earlier tumbling more than 3% to its lowest since July last year.
Adcock shareholder Bidvest Group, which opposed CFR's takeover, last week raised its stake to 34.5%, enough to unilaterally vote down CFR's offer of R74.50 a share.
Adcock, South Africa's second-largest drugmaker, is to hold urgent talks with CFR following Bidvest's buying spree and the Santiago-based company is widely expected to drop its stock and cash takeover offer.
Investors were betting Bidvest is unlikely to extend its 70 rand per share offer to remaining shareholders.
"Given the fact that the immediate prospects of a control premium have fallen away, it is perfectly understandable that the share price would be weak because the price it was trading at was on the expensive side of its fair value," said Wilhelm Hertzog, a portfolio manager at Cape Town-based RE:CM.
But investors are unfairly pessimistic about the nation's biggest over-the-counter drugs makers, according to Thomson Reuters StarMine. Adcock should be trading at about R73 based its most likely earnings growth trajectory over the next five years.
Adcock has shed nearly R1bn of value since Friday - when it also warned first-half profit likely fell more 20% as the weaker rand currency pushed up the costs of imported raw materials in a market where consumers are spending warily.
It was down 1.7% at R61.95 at 10:34 GMT, recouping some losses after earlier tumbling more than 3% to its lowest since July last year.
