Tiger Brands Gives Baxter Option to Buy in

Cape Town, Jul 22, 2008 (Business Day/All Africa Global Media via COMTEX) -- TBLMY | Quote | Chart | News | PowerRating -- Tiger Brands has signed an agreement giving Swiss group Baxter Healthcare the option to buy a stake in its soon to be unbundled health-care subsidiary Adcock Ingram, a deal potentially worth R4,8 billion, the fast-moving consumer goods retailer said yesterday.

"The agreement entrenches Adcock Ingram's long-standing relationship with Baxter, giving us greater access to their product pipeline and new technology," Adcock Ingram MD Jonathan Louw said.

Under the agreement, Baxter has the option to buy 50% plus one share of Adcock Ingram's hospital products division - Adcock Ingram Critical Care - between February and July 2010.

If Baxter exercises the call option and the sale takes place, Adcock Ingram will have a put option to sell its remaining stake in the business to Baxter. The soonest the deal can be concluded would be January 1 2011, subject to approval by the competition authorities.

The companies have agreed that if Baxter chooses not to exercise its call option, Baxter's exclusive agreements with Adcock Ingram will remain in place until 2023.

Baxter and Adcock Ingram's relationship dates back to the 1940s. Baxter owned 40% of Adcock Ingram Critical Care until 1986, when it sold the shares back to Adcock Ingram to comply with anti-apartheid trade sanctions.

Baxter did however continue to supply hospital products and intellectual capital to Adcock Ingram, and later entered into a series of deals with the company including licensing, distribution and raw materials supply agreements.

Tiger Brands also announced details of its plans to list Adcock Ingram on the JSE next month , a move it said would "allow it to focus on becoming a leading South African health-care company". Adcock Ingram is SA's second-largest health care firm, trailing Aspen Pharmacare, which is Africa's biggest generic drug manufacturer and the leading supplier of medicines to the state.

"The listing will enhance the strategic flexibility of Adcock so as to enable it to embark on its own strategy to grow by acquisition and internationalise the health-care business," Peter Matlare, Tiger Brands CEO, said.

Adcock Ingram will be listed with a total debt of about R250 million.

Louw said Adcock Ingram intended to expand its international footprint with acquisitions, and planned significant investments in new infrastructure. It had set aside R850m for capital projects that would expand its capacity and ensure it complied with international manufacturing standards.

In line with the government's preference for doing business with local firms with black ownership, Adcock Ingram aimed to clinch an empowerment deal within a year of listing.

"We have an invigorated management team, and we are determined to restore our reputation post the collusion issue," he said, referring to Adcock Ingram Critical Care's role in the price-fixing scandal uncovered by the competition authorities earlier this year. The group admitted it had colluded with other firms to fix the prices of intravenous drips and related products, and divide up markets between them.

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