Picture: REUTERS
Picture: REUTERS

Pharmaceutical manufacturer Adcock Ingram has reached a deal to buy Plush Professional Leather Care, part of its strategy to diversify into less regulated products in the consumer goods sector.

The group has agreed to buy the entire share capital of Plush for an undisclosed amount, but said historically the business generates revenue in excess of R200m annually.

JSE-listed Adcock Ingram is a subsidiary of the Bidvest group, and has three SA manufacturing facilities, as well as a factory in Bangalore.

Plush has a presence in Botswana, Namibia, Malawi and Angola as well as SA, with products including shoe care and tile cleaner. Adcock already competes in the fast-moving consumer goods sector, including through brands such as Panado and skin care through Island Tribe.

Though Adcock did not say how much they are paying for Plush's business, Asief Mohamed, chief investment officer at Aeon Investment Management said this was “a small acquisition” for the company and “probably a good bolt-on” to the existing enterprise.

A bolt-on acquisition is a type of acquisition in which the acquiring company merges the acquired company into one of its divisions.

The local pharmaceutical manufacturing sector is grappling with the negative effects on margins of the weak economy, low consumer demand, above-inflation increases in wage and utility costs, and strict government price controls that limit the scope for increasing medicine prices.

Adcock said the acquisition is firmly in line with its strategy of diversifying into less regulated product classes in the consumer sector. Plush’s product portfolio also has no overlap with Adcock’s existing portfolio. It  will enable the establishment of a home-care business within its existing business that already has critical mass, “allowing us to compete in this category in the Southern African market”, the company said.

“The (Plush) brand has excellent potential for further line extensions into adjacent product categories,” said Adcock.

Adock's share price, which has fallen over 30% in the past year, closed 0.94% higher in trading on Wednesday at R40.88.

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