Picture: ISTOCK
Picture: ISTOCK

AfroCentric, the owner of Medscheme and Pharmaceutical Direct, is positioning itself to compete with pharmaceutical giants after announcing on Tuesday that it has reached an agreement to acquire a further 74 percent stake in drug importing company Activo.

The black-owned investment company, which is partly owned by Sanlam, already owns 26 percent of Activo. Getting full control of the company will make it a significant player in the pharmaceutical industry.

"Though Activo competes with significantly bigger companies, like Aspen and Adcock Ingram, the pharmaceutical cluster is becoming an important part of our portfolio. It now contributes about 30 percent of the group's revenue. This is a meaningful transaction. It's a growing asset that is complementary our offering," said AfroCentric CFO Hannes Boonzaaier.

The transaction is still subject to regulatory and AfroCentric shareholders' approval, and will be effective from January 1 2019. AfroCentric will pay R588m for the transaction and this will be funded through a combination of cash and issue of the company's ordinary shares. Activo recorded R63m in aftertax profits in the year ended in June 2018 and its net asset value stood at R115m. The company imports and distributes generic, over-the-counter medication, supplements and complementary nutritional products across SA, Botswana, Namibia and Swaziland. Among many scheduled medicines the company imports and for which it is a rights holder, are numerous ARV drugs, antidepressants and diabetes generics.

The company previously had a tender to supply ARVs to the department of health, but Steven Classen, one of the current shareholders at Activo, said the primary focus is now the wholesale private sector. It distributes products to private hospitals and retailer dispensers such as Dis-Chem and Clicks. Boonzaaier said that while medical schemes administration contributes the bulk of the group's revenue and earnings, the pharmaceutical cluster has produced double-digit growth in the past two years. "It is the highest-growing business in our portfolio. Playing in the whole value chain enables us to create more synergies,"said Boonzaaier.

AfroCentric is invested in wholesale pharmaceutical supply, chronic medication distribution, medical scheme administration, managed care services as well as ICT solutions. The company established a pharmaceutical division in 2016 when it acquired the 26 percent stake that it already owns in Activo and a 100 percent stake in courier pharmacy business Pharmacy Direct. In the same year it bought 100 percent of Curasana, a wholesaler that provides medicine to government entities.

Both Pharmacy Direct and Curasana have benefited from government contracts, with Pharmacy Direct more than doubling business related to National Health Insurance since the acquisition. The total takeover of Activo will complete the picture by expanding its activity and medication distribution network in the private sector.