Australian Pharmaceutical Industries Ltd
Merger Called Off: Australian Pharmaceutical Industries Ltd’s (ASX: API) merger was called off by Sigma Healthcare. Sigma had got from API the non-binding proposal for the acquisition of all Sigma shares. According to it, for each Sigma shares there will be 0.31 API shares along with $0.23 cents in cash. This proposal was upon the condition and after getting regulatory approvals. After Sigma completed the standalone business review, it was found that Sigma must deliver the cost efficiencies of more than $100 million as a standalone business in the duration of next 18-24 months. The mentioned savings were distinct from the synergies of $60 million, recognized in the due diligence procedure by API. Further, as per the review Sigma’s FY23 EBITDA is expected to be at about same level as FY19. By FY23, the current investment cycle will almost be complete. The business should have a strong balance sheet with minimum debt on its books with positive opportunities from the acquisitions. Moreover, as per the due diligence the merger is expected to deliver $60 million per annum run-rate synergies, which is projected to come by the third year after the merger, will come mostly from the consolidation of the supply chain to Sigma-owned warehouses. On the regulatory front, there was more work to be completed. Therefore, Sigma’s Board after analyzing the future potential for Sigma on a standalone basis, and the conclusions drawn on due diligence, has concluded the proposal of API is not best for the Sigma’s shareholders interest. API’s stock has given a return of 6.67% in the last three months as on March 22nd, 2019, and it was trading at a P/E of 14.69x. The stock of the company last traded at the price of level A$1.46, up by 1.389% from its previous close.
Ramsay Health Care Limited
Expanding the footprint in Europe: Ramsay Health Care Limited’s (ASX: RHC) stock rose 1.40% as on 18 March after the company released the presentation that shows the company becoming a leading player in France in healthcare business with the coverage of about 50% of the French population. The company has 20/80 mental health plan which includes the expansion of the capacity of mental health by 20% and to convert 80% of it into single rooms by 2020. As per this plan, there are eight projects that due to be finalized by the end of 2019. RHC is also expanding in other European countries like Norway, Denmark, Sweden & Germany. RHC has received positive response in UK in terms of both price & volume. The company is expecting increase in tariff in UK from 1 April 2019. However, Brexit may bring some challenges for short term. Additionally, for the first half of FY 19, the company has reported 1% rise in the Group Core Net Profit After Tax (Core NPAT) of $290.8 million. Excluding the Capio acquisition, the company posted 1.8% rise in Core NPAT to $293.2 million. RHC’s statutory net profit after tax grew 9.6% to $270.1 million in 1H 2019 versus 1H 2018. The company had declared 4.3% increase in fully-franked interim dividend to 60.0 cents, payable on 29 March 2019. In addition, the company has reaffirmed FY 19 outlook and expects Core EPS to grow up to 2%, that includes the contribution of Capio. Meanwhile RHC stock has risen 18.84% in three months as on March 21, 2019. The stock is trading at the price of level $64.86 as on 22 March.
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