Is Sigma proposal superior in API bidding war?

Highlights

  • Sigma (ASX:SIG) acquired 100% shares of Australian Pharmaceuticals Industries (ASX:API). 
  • Sigma’s proposal allows API to offer fully franked dividends up to AU$0.05 per share.

Sigma Healthcare Limited (ASX:SIG), the Australian wholesale pharmacy, has announced that it has submitted a conditional non-binding indicative proposal to acquire 100% of the shares in Australian Pharmaceutical Industries Limited (ASX:API) by way of an API scheme of arrangement. 

According to the proposal, API shareholders would consider 2.05 Sigma shares and AU$0.35 cash for each API share held. shareholders will also have the option to choose between a maximum cash or maximum share compensation under the plan.

Existing offer from Wesfarmers (ASX:WES) is under due diligence.

Sigma has also shared that the proposal determines a value of AU$1.57 per API share before synergies based on Sigma shares' most recent closing price. Additionally, API shareholders would also own 48.8% of MergeCo under the proposal. 

The announcement has also revealed that the proposal would allow up to AU$0.05 per share fully franked dividends payment by API, including any final dividend for the financial year ended 31 August 2021.

About Sigma

Sigma Healthcare Limited is known to be owning the largest wholesale pharmacy business in Australia.  Meanwhile, on the ASX, the SIG stock has traded 3.362% higher at AU$0.615 per share at 11:18 AM AEST. 

Bottom line: 

As mentioned in the announcement, the API Board has agreed to the proposal and has determined that it is superior to the indicative non-binding proposal from Wesfarmers announcement earlier. As a result, API has decided to approver Sigma to undertake confirmatory due diligence and start working with the Company on negotiating by signing binding transaction documentation, including a Merger Implementation Deed.

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