Sigma (SIG) board rejects API advances, shares slump
Stock
Sigma Healthcare (SIG) $0.51 as at 13/03/2019
Australian Pharmaceuticals (API) $1.35 as at 13/03/2019
Event
Two of the listed pharmaceutical wholesalers have slumped today following an announcement by the Sigma board that they would not recommend the takeover offer by rival Australian Pharmaceuticals.
Late last year, API offered $0.23 in cash and 0.31 API shares for each Sigma share, which as at yesterday’s close was worth about $0.66, 8% above Sigma’s close price. We wrote about the deal here.
Australian Pharmaceuticals (API) Chart
The deal came at a tough time for Sigma, which had recently lost a big contract with Chemist Warehouse.
In the release, the board talks to the business review the company had completed, which noted “cost efficiencies of over $100 million” were identified in its business, compared to the $60m/pa efficiencies from FY22 seen in the merger. Additionally, through transformation, the EBITDA lost from the Chemist Warehouse contract would be replaced by FY23.
In rejecting the proposal, the board also noted Sigma may look at corporate deals of their own as they expect “to have a strong balance sheet with minimal debt and will have upside opportunities from acquisitions.”
Sigma Healthcare (SIG) Chart
Market Matters Take/Outlook
