Sigma sparks API bidding war


43281150 - medicines with money inside

Pharmacy Guild says it will monitor developments on API buyout for any “possible implications”.

Sigma Healthcare has made a takeover offer for Australian Pharmaceutical Industries (API), trumping Wesfarmers 11 day old bid, and valuing the company at $773.5 million.

Sigma made a conditional non-binding indicative proposal to acquire 100% of API for a combination of cash and scrip, with API shareholders to receive $0.35 in case 2.05 Sigma shares for each API share.

According to an ASX statement from API, the proposal would give its shareholders around 48.8% of the shares in the combined company.

Both the API and Sigma ASX statements touted potential annual “synergies”, calculated by Sigma, of $45 million. This represented “a potentially significant value creation opportunity for both Sigma and API shareholders,” the Sigma statement said.

“The API Board has considered the Proposal and determined that it is superior to the non-binding indicative proposal from Wesfarmers announced on 16 September 2021,” Sigma said in its release.

The proposal is subject to a number of conditions including satisfactory due dilgence by Sigma, the requisite regulatory approval around competition, unanimous recommendation by the API board and API shareholder approval.

W.H. Soul Pattinson (WHSP), which owns 19% of API and had previously agreed to its sale to Wesfarmers had, in its latest annual report, delivered last week, pointed to the then latest bid but said that “WHSP has agreed to vote in favour of any proposal recommended by the API Board”.

Hot on the heels of the recent Wesfarmers increased offer pricing API at $776 million, the pharmaceutical wholesaler/retailer universe is suddenly in flux and the Pharmacy Guild has again said it is keeping a close eye on the proceedings.

In a statement following the Sigma offer, the Guild said it “would continue to monitor bidding for API and examine possible implications”.

While admitting ultimately “this is a commercial matter and the boards of API and bidding companies will of course act in the interests of their shareholders” it affirmed it would “monitor the bidding in line with its own obligations towards patients and Guild members”.

A Guild spokesperson said it had “closely observed developments over recent months and would continue to keep members informed of any issues of interest”.

In early 2019 an earlier $727 million bid proposal from API for Sigma fell apart with then-Sigma chair Brian Jamieson declaring “the current API proposal does not reflect the long-term prospects and value inherent in Sigma having regard to the reset cost base of the business and our own growth agenda.”

The Wesfarmers initial $687 million offer for API in July – widely regarded as a “low ball” offer and which API ultimately rejected – prompted considerable speculation within the financial media that discussions between API and Sigma had resumed, with The Australian declaring Sigma the “logical suitor” for API.

Then earlier this month Wesfarmers revised its proposal, which valued the Priceline chain owners at $776 million, with API agreeing to the deal, subject to no superior offer being received.

 

The Sigma offer comes just days after the company announced the appointment of Vikesh Ramsunder of South African healthcare giant Clicks as Hooper’s replacement.

Hooper, in his parting shot earnings call with Sigma investors last week following its half-yearly results, played his cards very close to his chest saying only that the company had spent the past six months being “much more proactive” on the mergers and acquisitions front, concluding that “we don’t have anything to announce today”.

He kept the same poker face when telling The Australian last week that “there’s nothing that I was ever involved with” regarding a takeover of API.

News of the offer sent the Sigma share price up almost 3.5% and API’s up close to 4.5%. 

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