NATCO Pharma bids R4.2bn for Adcock Ingram: A strategic move into the South African market

NATCO Pharma, a listed pharmaceutical manufacturer in India, has put in a bid to acquire 135-year old South Africa pharmaceutical group Adcock Ingram Holdings via a R4.2 billion deal involving a cash offer to minority shareholders.

Adcock Ingram’s share price rocketed on the JSE on Wednesday on news of the bid, with the share price ending 18.1% higher at R67.70. The offer was pitched at R75 per Adcock Ingram share, which represents a significant premium to the share price.

The offer comprises all the shares in Adcock Ingram, excluding those already held by NATCO Pharma and major shareholder Bidvest. Should the offer be accepted, NATCO Pharma will hold a 35.75% stake in Adcock Ingram, valued at R4bn, and the local manufacturer will be delisted from the JSE. Bidvest Group is the major shareholder in Adcock with a 64.25% stake.

NATCO Pharma is headquartered in Hyderabad, India, and develops, manufactures, and distributes generic and branded pharmaceuticals, speciality pharmaceuticals, active pharma ingredients, and crop protection products.

The company has a focus on delivering quality medicines in oncology, cardiology, neurology, and other high-value therapeutic categories. Products are manufactured in state-of-the-art facilities and are certified and approved by leading global regulatory authorities, including the US FDA, Brazil's ANVISA, Health Canada, and the World Health Organisation.

Around 79% of NATCO Pharma’s production is exported to more than 50 countries worldwide, including the US, Canada, Europe, and Brazil. The company had a strong cash position of more than R6.2bn as at its March 31 financial year-end.

NATCO Pharma CEO Rajeev Nannapaneni said Adcock Ingram has well-recognised brands and products and maintains a leading position in the South African pharmaceutical market. He said the deal could provide NATCO Pharma with a well-established entry into the Southern African market.

He said NATCO Pharma could potentially bring significant value through its research and development programs, dossier approvals, intellectual property sharing, experience in regulated market operations, sourcing, and global marketing, thereby enhancing Adcock Ingram’s competitiveness.

Adcock Ingram currently has a small free float with limited traded liquidity. The R75 potential cash offer represents a premium of 43.7% to the closing share price on July 21, the last trading day prior to the release of the cautionary announcement, and a 49.6% premium to the 30-day volume-weighted average price.

The offer is underpinned by the recommendation of the offer by an Independent Board of directors of Adcock Ingram, and a fair and reasonable value opinion based on an independent expert valuation by BDO.

Adcock Ingram generated revenue of R6.9bn  in the 2024 financial year. The company achieved EBITDA of R1.4bn, at a margin of 14.6%, and a profit after tax of R814m.

It was envisaged that post-acquisition, Adcock Ingram would continue to operate as a private South African business, supported by two shareholders, Bidvest and NATCO Pharma. Business operations would remain uninterrupted, with no changes to the company's structure, existing partnerships, joint ventures, or supplier relationships.

Andrew Hall, CEO of Adcock Ingram, said: “This offer is a huge vote of confidence in Adcock Ingram’s people, brands, and business model, and the South African healthcare environment. NATCO Pharma is a respected global pharmaceutical company, distributing products in more than 50 countries. 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.”

Mpumi Madisa, Adcock Ingram chairperson and Bidvest CEO, said that since Bidvest acquired the shareholding in Adcock Ingram over a decade ago, Bidvest had been actively involved in its management and focus to expand its products.

“Bidvest is supportive of the cash offer being made by NATCO Pharma, which unlocks numerous synergies and enables a partnership to further expand Adcock Ingram’s product and geographic diversification," she said.

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