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Why PIC is blocking Adcock deal

Johannesburg - A top financial daily weighed in on the acrimonious battle between the state pension fund and Chile's CFR Pharmaceuticals on Thursday, accusing the asset manager of "hostility to foreign investment".

The state-owned Public Investment Corporation (PIC) has spurned CFR's sweetened $1.2bn cash and stock takeover offer for drug maker Adcock Ingram, saying it wanted all cash.

CFR has since accused the PIC, which manages more than R1.4 trillion in government employee pensions and is the top shareholder of Adcock, of protectionism.

In an editorial on Thursday, Business Day agreed with CFR's assessment, saying the PIC had failed to make clear its objections to the deal.

"Given the lack of any other compelling reason for the PIC opposition, it becomes hard to dispute CFR chief executive Alejandro Weinstein's contention that it is hostility to foreign investment," Business Day said.

The newspaper said the demand for an all-cash offer called into question the fund's motives, since the PIC initially backed a lower offer for Adcock from local conglomerate Bidvest earlier this year.

Bidvest, in which the PIC is also the top shareholder, in March offered R62.18 per Adcock share in cash and stock for 60% of the nation's No.2 drugmaker, an offer Adcock's board snubbed as "opportunistic".

CFR is offering R74.50 in cash and shares for all of Adcock, a bid that has irrevocable support from shareholders holding 29% of Adcock.

The PIC is expected to issue a statement later on Thursday, responding to CFR's charges and detailing its reasons for rejecting the offer.

A source familiar with the fund's thinking has told Reuters the stock component of the deal forces the PIC to invest in a company that would be controlled and managed by people it does not know well.

An all-cash offer would allow the PIC to exit its investment, the source has said.

The rare Chile-South Africa tie-up is also jeopardised by a new cash offer from Bidvest, which this month went direct to shareholders with a R70 per share offer for about a third of Adcock.

Bidvest has already built up its Adcock stake to about 7%, enough to torpedo the deal when combined with the PIC's 19% stake.

The deal needs backing by shareholders holding 75% of Adcock to go through. A vote on the deal was delayed to January next year.

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