Australia's Sigma Healthcare board rejects API takeover bid

Cornelia Mascio
Marzo 15, 2019

Sigma shares ended at 53.5 cents, down 12.5% on the day, but well above the 40.5 cents, they were at when API revealed its indicative offer on December 14 past year.

Australian pharmacy operator Sigma Healthcare Ltd's (SIG.AX) board on Wednesday rejected a A$727 million ($514.5 million) takeover bid from Australian Pharmaceutical Industries Ltd (API) (API.AX), saying it was not in the best interests of shareholders.

"It is clear that API's non-binding indicative offer to pursue a merger of API and Sigma is unable to be taken forward", API said.

"Therefore, after considering the API Proposal in detail, we believe it is not in the best interests of our shareholders".

"The Board is confident that after thoroughly assessing the outlook of Sigma on a standalone basis, 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", said Sigma chairman Brian Jamieson.

As of the market close on Tuesday, the offer was worth 67 cents a share, Sigma said.

The cost savings will enable underlying earnings to rebound to 2019 levels by the 2023 financial year, according to Sigma.

Sigma has since completed and validated a major business transformation review identifying more than $100 million in cost efficiencies, which Sigma is capable of delivering as a standalone business over the next 18 to 24 months, it says.

At 1031 AEDT Sigma shares were trading at 59 cents a share, down 3.28 per cent. API shares were trading at $1.3875 a share, down 0.89 per cent.

The loss of the Chemist Warehouse contract will free up around $300 million cash for further acquisitions to boost "invest in income streams that build off the same infrastructure", Sigma chief executive Mark Hooper said in February.

As well as the assessment of Sigma as a standalone, factors influencing the decision also included the fact that since API sent its October 2018 proposal, its share price has declined by more than 15%.

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