Australia's Sigma Healthcare board rejects API takeover bid

15 Mars, 2019, 05:55 | Auteur: Auguste Feret
  • Sigma rejects API merger proposal

Sigma Healthcare looks set to remain a standalone company after its board rejected a merger proposal from rival wholesaler Australian Pharmaceutical Industries (API).

"It's a disappointing development and hard to understand how this path forward is in the interests of either Sigma or API shareholders", he told the Financial Review.

"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.

API released a statement shortly after lunch, saying it would reconsider its shareholding in Sigma, and casted doubt on Sigma's claims.

Further, the API share price had dropped by more than 15% since October, when API made the proposal, meaning the deal offered to Sigma shareholders had declined in value.

API believed a merged business would boost support for community pharmacists while providing scale and volume.

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API criticised Sigma for cutting off talks and prioritising "the uncertain restructure of its standalone business", which will be downsized significantly following the loss of Chemist Warehouse contract. Sales of pharmaceutical products to Chemist Warehouse were responsible for 42 per cent of Sigma revenues.

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.

But Sigma said shareholders should be buoyed by the cost savings of losing that deal.

Sigma said while it agreed the tie-up could save the combined company $60 million a year in synergies from consolidating its supply chain, a business review completed in February found there were also $100 million in savings Sigma could achieve through cost-cutting as a stand-alone company.

In addition, $300 million in working capital will be freed up, which is expected to be used to fund growth opportunities.

API is yet to respond.

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