Sigma rejects API merger proposal

The proposed merger between the owners of the Priceline and Amcal pharmacy chains is off after Sigma Healthcare rebuffed an approach by its rival

The proposed merger between the owners of the Priceline and Amcal pharmacy chains is off after Sigma Healthcare rebuffed an approach by its rival

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 API Proposal remains highly conditional and subject to regulatory approvals including any required competition approvals, says Sigma.

The deal was worth $726 million at the time but the fall in the API's share price means the deal, which is to be financed with cash and API shares, is now worth less than $700 million.

Yesterday Sigma justified its rejection, saying the offer is not in the best interest of 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", he said.

Sigma also said that the returns to Sigma shareholders under the API Proposal would depend on ACCC approval of the transaction, the successful integration of the two businesses, capturing the proposed synergy benefits, as well as the continued trading performance of both businesses and market trading valuation metrics... implying an execution risk.

Microsoft’s Xbox Live can soon work in any Android game
Regardless of which features game developers pick, the features will be enabled through a single sign-in to a Microsoft account. They're releasing a new SDK for developers that will allow Xbox Live to be added to Android and iOS apps.

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.

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

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.

"A business review undertaken by Sigma in conjunction with Accenture identified over $100 million annual cost savings post the expiration of the MyChemist/Chemist Warehouse (MC/CW) contract, with potential for further upside to be achieved", it said.

Mr Hooper pointed to Sigma's soon-to-be debt-free balance sheet, with the $300 million of working capital freed up from the Chemist Warehouse contract to be directed to growth opportunities, including aquisitions, creating more value for suffering investors.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.