1 Table of Contents
2 EXECUTIVE SUMMARY. 3
3 INTRODUCTION. 4
3.1 Problem Statement 5
3.2 Research Questions 6
3.3 Objectives of the Research/Case Study 6
4 BIDVEST INGRAM ADCOCK CASE STUDY ANALYSIS. 7
4.1 Bidvest Acquisition Corporate Strategy. 7
4.2 Motivation for Mergers and Acquisition 17
4.3 Failures and Successes of Mergers and Acquisition strategy 19
5 Recommendations. 20
5.1 Turnaround strategies for Adcock. 20
5.2 Value and Wealth creation in mergers and acquisition, in particular unsolicited takeovers. 21
6 CONCLUSION 22
6.1 Conclusion 22
7 BIBLIOGRAPHY 23
2 EXECUTIVE SUMMARY.
Bidvest Group is a South African services, trading and Distribution Company founded in 1988 by Brian Joffe.The Company owns or has significant shareholdings in over 300 companies, and employs approximately 137 000 staff.(Wikipedia).
Similarly Adcock Ingram is a South African company specialising in manufacturing and health care products to both private and public sectors and is the second largest pharmaceutical company after Aspen. Ingram was founded in the early 1900’s and soon grew to successful business. Tiger Brands in 1999 bought Adcock Ingram for R3.4 Billion(Wikipedia) and was later unbundled in 2008 and was left in a weakened state as Tiger Brands did not maintain Adcock’s distribution infrastructure and also took good brands in the process. This was according to comments by Vunani Securities Analyst, Alec Abraham.
In December 2013, Bidvest made an unsolicited bid in cash offer to the shareholders of Adcock Ingram to acquire up to 34.5% of the issued ordinary shares in Adcock. (Madisa, N.2015 p 2).
According to the 2015 Research Report on valuation of target companies in mergers and acquisition; the case of Aspen Pharmacare and Adcock Ingram by Nompumelelo Madisa, the reason for Bidvest making a direct offer to Adcock shareholders was that the Board of Adcock was supporting an alternative bid by a Chilean company called CFR Pharmaceuticals (CFR). Mokhele (2013) stated that the Adcock Board believed that an Adcock-CFR combination would be in the best interests of shareholders. This statement was contrary to the belief of Adcock’s major shareholder, the Public Investment Corporation (PIC). Whilst the Adcock Board was intent on their strategic support of the CFR bid, the PIC a largest shareholder with 14 % shareholder in Adcock at the time, vehemently disapproved of this decision and acted on their non-support of the CFR bid by supporting Bidvest and voting against the CFR offer.
Adcock CEO Jonathan Louw claimed to have been taken by surprise that Thursday evening when he heard about the deal. (Bid Vest’s unsolicited bid for Adcock Ingrams Case Study 6.1).
3.1 Problem Statement
3.2 Research Questions
The key questions to be satisfied from this case analysis are as follows:
• To explain the corporate strategy used by Bidvest in the case. Was Bidvest successful in its endeavours?
• Why do companies merge or acquire other companies?
• Why do some mergers and acquisitions fail?
3.3 Objectives of the Research/Case Study
The following are the objectives of the case study.
1. To assess the Business strategy used by Bidvest.
2. To assess the successes and failures of the venture on merging and acquisition by Bidvest and Adcock.
3. To Investigate and understand the reason for companies merging and acquiring other companies.
4. To understand why do some mergers and acquisitions fail?
4 BIDVEST INGRAM ADCOCK CASE STUDY ANALYSIS.
4.1 Bidvest Acquisition Corporate Strategy.
4.2 Motivation for Mergers and Acquisition
4.3 Failures and Successes of Mergers and Acquisition strategy
5.1 Turnaround strategies for Adcock.
5.2 Value and Wealth creation in mergers and acquisition, in particular unsolicited takeovers.
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