Finance

Department of Finance and Tax

Applied Corporate Finance

[FTX4057S]

Class Test

18 September 2013

Time Allocation: 2¼ hours

Total Mark Allocation: 90 marks

Instructions:

•

Answer all questions. It is not required that you answer each question in a

separate answer book.

•

Responses that exceed the word or page limits specified will be penalized.

•

You are required to submit your question paper to the invigilators along

with your script. Kindly ensure that your name and student number is

clearly visible on the front of this question paper prior to submission.

1

THE OFFERS FOR ADCOCK INGRAM

The Initial Offer

On Friday 22 March 2013, Bidvest Group, the JSE-listed diversified industrials firm which has a stable

of companies that spans everything from catering to freight, made an offer for control of 60% of

pharmaceutical firm Adcock Ingram. Bidvest currently owns 2.5% of Adcock and said it believed the

drug maker would benefit from membership in its stable of companies and that Bidvest wanted to

upgrade distribution networks at Adcock but that — depending on management at Adcock — plans

could develop in different areas. Bidvest had built its 2.5% holding via two purchases - 1.14% was

purchased in a transaction in September 2012 while the balance was purchased in March 2013.

While Adcock had been aware of the purchases, the size of the transactions had not caused alarm at

the time.

Bidvest said it was offering R65 per share, to be paid half in cash and half in its own shares. It said it

would offer one of its shares for every four Adcock shares. The offer price represented a marginal

premium on Adcock’s previous close of R61.40. The deadline for acceptance or rejection of the offer

was set at April 2.

"I think Adcock must look at proposals from investors as the company would benefit from a buyout.

As it stands, it has not performed well since being unbundled from Tiger Brands in 2008," analyst

David Shapiro said...