The Board of Sigma Healthcare Limited (ASX: SIG) believes that the current API proposal is not reflecting the long-term prospects and value inherent in Sigma, which is why the Board has concluded that the current API proposal is not in the best interests of Sigma’s shareholders. This conclusion came after a detailed assessment of the API Proposal and Sigma’s outlook on a standalone basis.
Under the proposal, Australian Pharmaceuticals Industries (API) had offered to acquire to acquire all the shares in Sigma through a scheme of arrangement. Since January 2019, both the companies (API and Sigma) were engaged in a limited form of due diligence which was focused on the synergy and regulatory workstreams. Both the companies shared high-level information through virtual data rooms and in-person due diligence sessions.
Recently on 4 March 2019, API reconfirmed its non-binding indicative proposal on essentially the same terms as the indicative proposal sent on 11 October 2018, with a waiver of the condition precedent relating to confirmation of cost synergies.
While coming to the conclusion regarding the API Proposal, Sigma Board took various factors into consideration which include considering the future potential for Sigma on a standalone basis, considering the valuations metrics of API and execution risk.
Through a business review, Sigma had identified more than $100 million annual cost savings after the expiration of the MyChemist/Chemist Warehouse contract. Further, there is a potential for further upside to be achieved. The company’s Board believes that significant shareholder value could be realized for Sigma shareholders on a standalone basis through the implementation of these cost-saving initiatives over the next two year. From 11 October 2018, the date of API Proposal, the API share price has decreased over 15 percent, implying a value for the proposal of 67 cents per Sigma share at close on March 12, 2019. This represents a 12 percent decline in offer value to shareholders.
According to Sigma’s Chairman Brian Jamieson, the Board of Sigma is confident that the current API proposal is not reflecting the long-term prospects and value inherent in Sigma having regard to the reset cost base of the business and the company’s own growth agenda. Therefore, after assessing the API Proposal in detail, the Board has concluded that the proposal is not in the best interests of Sigma’s shareholders.
Now, let’s have a glance at the company’s share performance and the return it has posted in the past few months. The shares are trading at a price of $0.530, down by 13.115% during the day’s trade with a market capitalization of ~$646.26 Million as on 13 March 2019 (AEST 1:40 PM). The counter opened the day at $0.605 and reached the day’s high of $0.610 and touched a day’s low of $0.510 with a daily volume of more than 6,382,573. The stock has provided a year till date return of 8.93% & also posted returns of 7.96%, 45.24% & 0.83% over the past six months, three & one-months period, respectively. It had a 52-week high price of $0.985 and touched 52 weeks low of $0.405, with an average volume of ~5,315,533.
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